private equity in luxembourg (2014)

2014 Edition

LUXEMBOURG PRIVATE EQUITY & VENTURE CAPITAL ASSOCIATION


LPEA | Bâtiment Président Park | 8, rue Albert Borschette | L-1246 LuxembourgE-mail: [email protected] | Telephone: + 352 40 78 78 483

L U X E M B O U R G P R I VAT E E Q U I T Y & V E N T U R E CA P I TA L A S S O C I AT I O N

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1. Foreword 4

2. Luxembourg – a conducive environment for Private Equity 6

3. Private Equity in Luxembourg 8 3.1. Background and historic evolution 9 3.2. Typical Luxembourg Private Equity structures 11 3.3. General Partners 12 3.4. Middle Offices 12 3.5. Back Offices 12

4. The Luxembourg Tax Environment 13 4.1. Direct taxation of corporations 15 4.2. Miscellaneous charges or fees 18 4.3. Personal income taxation 19

5. Private Equity – Legal Framework 20 5.1. Luxembourg Private Equity unregulated and regulated structures 20 5.2. Important aspects of Luxembourg Private Equity vehicles 21 5.3. Structuring by means of Luxembourg Vehicles 23 5.4. Thematic funds 26 5.5. Sharia compliant structures 26

6. Accounting Framework for Luxembourg PE Vehicles 27 6.1. Accounting Standards 27 6. 2. Valuation Rules 27 6.3. Consolidation 28 6.3.1. Unregulated Vehicles 28 6.3.2. Regulated Vehicles (SICARs and SIFs) 29 6.4. Profit Repatriation 29

7. The Alternative Investment Fund Managers Directive 30

8. The Regulation on European Venture Capital Funds 31

9. Private Equity Services Provision 32 9.1. Context and overview 32 9.2. Depositary Services 32 9.2.1. Monitoring function 32 9.2.2. Safekeeping of assets 32 9.3. Banking services 33 9.4. Legal, tax and audit services 33

10. How to set up a Private Equity Fund in Luxembourg 34

11. Glossary 36

12. Useful References 38

13. List of LPEA Members 39 Private Equity Firms 39 Private Equity Services Providers 40

TABLE OF CONTENTS

L U X E M B O U R G P R I VAT E E Q U I T Y & V E N T U R E CA P I TA L A S S O C I AT I O N1 . F o r e w o r d

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1. Foreword

Luxembourg has now built up a leading position in Europe as the jurisdiction of choice for the Private Equity industry. From a handful of players in 2000, Luxembourg is home today to over 60 Private Equity firms with most of the large European GPs and many of the large US GPs now having established operations in Luxembourg. According to LPEA estimates the industry’s assets under management in Luxembourg amount to over $258 billion, a figure we expect to continue increasing as new players discover the many advantages this domicile offers.

Multiple factors have been contributing to the industry’s growth. Besides a legal toolbox second to none (funds, AIFMs, SPVs), political and economic stability and predictable taxation on the back of an unrivalled financial infrastructure, Luxembourg boasts a business friendly attitude, combined with a strong governmental commitment towards Private Equity.

While a wide range of Private Equity and Venture Capital funds have used Luxembourg’s SPV structure and double taxation treaty network as a hub for their cross-border investments, making their structuring both efficient and neutral, a growing number of firms are setting up middle and front office operations in Luxembourg to benefit from Luxembourg’s critical size and expertise as Europe’s leading AIFM-UCITS center.

J é r ô m e W i t t a m e rP r e s i d e n t

About the Luxembourg Private Equity & Venture Capital Association

The Luxembourg Private Equity and Venture Capital Association (LPEA) is a member-based, non-profit trade association established in 2010, covering the whole range of Private Equity from Venture Capital (seed, start-up and development capital) to buy-outs and buy-ins.

LPEA represents, promotes and protects the interests of the Luxembourg Private Equity and Venture Capital industry. It is both a contributor to the country’s private equity regulation and a key player in the preparation of the market players to the sector’s challenges. LPEA is a member of the Luxembourg for Finance initiative and represents Luxembourg within the European Private Equity and Venture Capital Association (EVCA).

This brochure aims to provide Private Equity professionals and their advisers with a comprehensive yet focused overview of the general business, legal, tax and regulatory environment that Luxembourg offers to the Private Equity industry. Whether you are exploring Luxembourg for the first time or you are refreshing your knowledge, we trust you will find this brochure useful and we at the LPEA are at your disposal to provide you with any further information needs you may have.


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According to the latest Global Financial Centres Index, published in September 2014, Luxembourg ranks as the leading financial centre in the Eurozone. Luxembourg is also well known as the world’s leading centre for the crossborder distribution of investment funds, now with over 3 trillion euro of assets under management. What is less well known, is that Luxembourg represents a recognized hub for Private Equity investments within Europe and worldwide. In fact, Luxembourg’s Private Equity industry is thriving. Nine out of ten of the world’s largest fund managers are operating out of Luxembourg. The reasons are obvious.

Luxembourg benefits from unparalleled economic, political and social stability. The country has sound public finances and ranks among the very few with a triple A rating. It is widely acknowledged that Luxembourg has one of the most business friendly environments anywhere, with authorities that always keep an open ear for the private sector. The move towards greater transparency in tax matters contributes to enhance further Luxembourg’s image as a well-regulated international financial centre, and attract additional business.

The Private Equity industry benefits from a clear legal framework, as well as from an attractive tax regime. Luxembourg provides fund managers and administrators with a comprehensive toolbox, to help them set up and run their investments in a most efficient manner. Luxembourg law offers diverse possibilities to set up and structure Private Equity investments, including both regulated and unregulated vehicles. More recently, limited partnerships and alternative investment funds (as foreseen in the AIFM Directive) have been added to the range of available structures. A whole eco-system of local service providers caters to the investor’s every need, from company creation and management to administration, from domiciliation and accounting to compliance and legal services.

Luxembourg develops into an international hub for innovation. The start-up scene is growing. Incubators, accelerators and co-working spaces for start-ups are popping up all over the country. Innovation clusters are gaining traction. Public and private research and development centers are expanding their operations.

Skype and Wix are probably the most famous among the many world-class success stories of Luxembourg’s Private Equity industry. The LPEA plays an important role in getting the word out that Luxembourg is a cutting edge location for creating, funding, and growing innovative business models. Private Equity funds and their managers play a key role for the further growth and diversification of Luxembourg’s financial centre and its economy as a whole. They also contribute to raise further awareness for Luxembourg as an international platform from which to funnel investments all over the world. Luxembourg plays this central role already with regard to UCITS funds. Based on that experience and expertise, Luxembourg is ideally positioned to become one of the major international players in the Private Equity area as well. The LPEA and its members are leading the way, for which they have my recognition and support.

M r . P i e r r e G r a m e g n aM i n i s t e r o f F i n a n c e

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2. Luxembourg – a conducive environment for Private EquityChoosing the right location for Private Equity houses means taking into consideration many different factors. The following features are Luxembourg’s strengths – the combination of these strengths makes Luxembourg attractive to Private Equity.

Political & economic stabilityThe political stability of Luxembourg is marked by a political culture of consensus where the traditional parties coexist within the context of broad agreement on key issues. In this context, a group of key ministers have been allowed to remain in government for a significant period of time providing continuity in important policy initiatives under successive coalition governments, with an emphasis on economic policies. The business-friendly political environment is conducive to welcoming decision-makers and entrepreneurs. Attracting international players is considered paramount in building an efficient business framework and economic growth, and has enabled Luxembourg to establish a permanent and innovative business community. An illustration is the recent special tax regime for highly skilled workers aimed at attracting a specialized workforce in areas such as Private Equity.

A stable and rewarding tax environmentThe tax framework is considered among the most stable and rewarding in Europe for companies, their shareholders and their employees. This is a key component of Luxembourg’s development. The tax authorities lead a constructive dialogue with taxpayers, have a business friendly attitude and the quick and pragmatic approach to the requirements of international investors. Luxembourg is not a tax haven but it offers one of the most flexible and attractive tax regimes within the EU.

The strength of the Luxembourg financial services industry Luxembourg is the largest financial centre for investments funds in Europe and the second largest worldwide. Promoters from 42 countries distribute their Luxembourg funds around the world through more than 42,000 distribution agreements: 72% of authorizations for distribution granted to worldwide funds are allocated to Luxembourg funds. Luxembourg has been able to turn retail EU funds, the UCITS, into a brand that stands on its own, not only within Europe but worldwide. In view of the fact that more than 44,000 people are employed in the financial services industry which contributes around 26% of the gross domestic product (source: CSSF Oct. 2014 and Statec, Nov. 2010) it is easily understandable why the financial industry and government are working closely and smoothly together to ensure continued efficiency. Luxembourg today hosts more than 500 companies servicing funds, such as central administrators, domiciliary agents, law firms, auditors, consultants, depositaries, management companies and alternative investment fund managers (AIFM) and many more; an industry that continues to develop dynamically.

Business-friendly environmentLuxembourg has a unique system of social dialogue that involves regular meetings between the government, employers’ representatives and unions, which is key to avoiding social conflicts and to reaching consensus on important decisions regarding economic and social affairs.Luxembourg was further one of the pioneers to implement Directive 2011/61/EU on alternative investment fund managers and has largely leveraged on its long-standing and recognised UCITS experience to adapt the private equity industry to the new regulatory standards and marketing or placement regimes. Although the initial objective of the G20 and the EU Commission was principally aimed at regulating the alternative investment industry in order to control and avoid systemic risk, the AIFMD indeed also entails a European marketing passport for AIFM. Once authorised in a EU Member country, these AIFMs can market the AIFs they manage to professional investors in all other EU Member countries.

We at KKR first set up our Private Equity structures in Luxembourg almost ten years ago. Luxembourg not only offers a friendly and efficient workforce of highly educated multilingual people but also a competitive, flexible and secure business environment. We expect that Luxembourg will strengthen its position as a leading private equity jurisdiction in the future.

Reinhard Gorenflos, KKR Partner, London


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Luxembourg

In the context of UCITS, Luxembourg has taken advantage of the opportunities given by the passport regime and has, on that basis, become the leading jurisdiction in the world for retail cross-border distribution. Luxembourg is therefore currently building on this positive experience and offer the possibility for both AIFM and AIF to use Luxembourg as their hub for marketing AIFs to professional investors in the EU and, potentially, as is currently the case for UCITS, beyond the EU. A considerable number of Luxembourg UCITS management companies have also obtained approval to act as AIFM, allowing them to manage both UCITS and AIF. These AIFMs, as well as stand-alone AIFMs without UCITS licenses, offer private equity sponsors a cost-efficient solution, benefitting from the marketing passport.

A strategic position at the heart of Europe One of the prime features of Luxembourg’s success is its geographical location. Luxembourg profits from a strategic position at the crossroads of Europe, with direct rail, road and air routes to the largest European cities.

Speed to market – the AIFMD was implemented into Luxembourg

law by the AIFMD Law of 12 July 2013

The AIFMD Law aims at positioning Luxembourg as one of the European first movers. At the same time the AIFMD Law introduced a number of additional measures that further enhanced the attractiveness of Luxemburg as a hub for Private Equity • Creation of a new limited partnership regime and modernization of the existing limited partnership

regime• Introduction of a specific carried interest taxation regime• AIFMD related product level regulation (i.e., SIF and SICAR) adjustments• Introduction of a new category of specialized PSF for AIFs, SICAR and SIF (new professional status for

depositaries of assets other than financial instruments)• New management company regimes.

At the heart of Europe’s highway network:Taking the highway, Frankfurt, Cologne and Brussels are only at a 2 hours’ drive while Munich, Amsterdam, Paris, Geneva and Zurich can be reached within 4 hours.

Luxembourg is served by an international airport connecting the country to major European business centres. Luxembourg is at a one – or less - hour flight from London, Paris, Frankfurt, Zurich, Geneva and Milan.Other direct flights connect Luxembourg to Amsterdam, Berlin, Copenhagen, Dublin, Istanbul, Madrid, Munich, Stockholm and Vienna.

Efficient train connections: The TGV brings Paris within a 2 hour reach while Brussels is 2 hours away by standard train.

One hour flight to major European cities:

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A highly innovative and dynamic center Alongside one of its main pillars, namely the financial services industry, the Luxembourg government has identified four major industries as the core sectors to be developed in Luxembourg over the coming years. Major efforts will be made to attract innovative companies to either start their business in Luxembourg, set up in Luxembourg or to foster research and development. These key industries are:• healthcare and clean technology• telecommunication/media/technology (“TMT”)• information & communication technology (“ICT”)• transportation and logistics. The Luxembourg government has set the goal to develop these industries leveraging on the expertise and reputation it already has in these fields.

Skilled and multi-lingual workforce The Luxembourg labour market offers a pool of highly skilled and multilingual resources. With more than 150 nationalities represented, its workforce is truly international: almost 45% of residents and more than 70% of the active population are well-integrated foreigners. The Greater Region represents a natural extension of Luxembourg’s domestic market and also provides a solid workforce for Luxembourg’s business: Around 160,000 of Luxembourg’s workforces commute from neighbouring countries France, Germany and Belgium to Luxembourg on a daily basis, contributing to the skill-set available in Luxembourg. Many people in Luxembourg speak 3 or 4 languages (Luxembourgish, German, French, English, Portuguese, Italian, Spanish, etc.). This, combined with the high level of professional qualifications held by staff, has allowed Luxembourg to respond to the requirements of multilingual and multicultural investors.

Commitment to EuropeLuxembourg is also well known for its role within the European Union. As a founding member of major international organisations such as BENELUX, the Council of Europe, the European Union, NATO, OECD and the United Nations, Luxembourg has influence that belies its size, especially within Europe. It is host to many European Union institutions amongst which are departments of the Commission, the Council and the Parliament, the Investment Bank, the Court of Justice, the Court of Auditors and the Statistical Office.

High quality living standards Luxembourg has one of the world’s highest per capita gross domestic products (source: IMF) and is one of the top ranking countries in terms of Human Development, Quality of Life, Personal Safety and Corruption Perceptions indices (source: UNDP, OECD Better Life Index, Transparency International 2013 study).

3. Private Equity in Luxembourg… has a long tradition: Luxembourg has set an ambitious agenda to attract Private Equity houses to provide more middle-office related services from Luxembourg, in particular with regard to increasing substance requirements and AIFMD-related regulatory standards.

Out of the 10 largest Private Equity houses worldwide, 9 are doing business out of Luxembourg. Most have started by leveraging the advantages that Luxembourg holding companies provide when structuring Private Equity acquisitions. But business interests have since driven more substance to Luxembourg. This originally discrete business with little local presence in Luxembourg has fundamentally changed as Private Equity houses have been enhancing their presence in Luxembourg by establishing or ramping up operations and other capabilities.

A clear trend toward enhanced transparency and regulation drove Luxembourg to respond by introducing the regulated private equity and venture capital vehicle SICAR in 2004 and the SIF in 2007 which, in retrospect, anticipated many of the legal requirements that were introduced in the Alternative Investment Fund Managers Directive (“AIFMD”) in July 2013.

Combining flexibility in legal and tax structuring, a reputable and stable financial environment and efficient infrastructure has brought hundreds of Private Equity participants, both established and emerging, to set up some or all of their Private Equity structures in Luxembourg.


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3.1. Background and historic evolution

Luxembourg has been used for many years for the structuring of international acquisitions via unregulated vehicles such as SOPARFIs, building on the infrastructure, expertise and knowledge that Luxembourg has developed in the retail funds industry over the past 30 years and combining this with a favourable environment for Private Equity.

Today Luxembourg is the domicile of approximately 50,000 registered holding companies of which a considerable number is used to structure Private Equity acquisitions.SICARs were created upon an industry initiative specifically designed to meet the needs of Private Equity and Venture Capital actors; SICARS are lightly regulated, offering flexibilities on the structuring of its constitutive documents and operations.

For the regulated SICAR and SIF, which will be described in further detail in section 5.1., the following are the most recent figures, as published by the Luxembourg supervisory authority of the financial sector, the CSSF (Commission de Surveillance du Secteur Financier):

Î SICAR:

• The number of authorized SICARs was at 279 at the end of year 2013• In 2013, out of the 279 SICARs, 237 were investing in Private Equity, 114 in Venture Capital, 9 in Mezzanine

and 3 in Private to Public projects (multiple nominations possible)• From a sector perspective, 180 SICARs were Multi-Sector, 41 invested in Opportunistic Real Estate, 38 in the

Services Industry, 31 in Technology Firms, 20 in Energy, 17 in public-to private projects, 13 in Industry, and another 23 in other sectors

• As regards the initiator origin, the largest share of SICARs was attributed to French initiators (19%), followed by Swiss, German and Luxembourgish initiators. The largest number of non-European SICARs was set up by US-based Private Equity houses with 7%. 36% came from other European and non-European countries.

• Assets under management of these SICARs were approx. € 32.3 bn.


10Players on the Luxembourg Private Equity scene

• GPs / Private Equity houses or their subsidiaries: Whilst historically local presence was limited mostly to smaller and/or emerging GPs, many large international houses have set up and conduct business out of Luxembourg since the middle of the last decade with a considerable and growing local substance.

• Private Equity administrators: These service providers offer domiciliary, accounting, trust services and, since the introduction of AIFMD in 2013, depositary services for closed-ended funds investing in Private Equity and Venture Capital. They provide offices to conduct business from, as well as a range of additional services to Private Equity houses that are conducting business out of Luxembourg. Luxembourg is home to both Private Equity centric or specialized administrators Equity as well as many more generalist administrators that are often part of larger financial services groups. Governance standards of Private Equity structures set-up in Luxembourg have undergone a significant evolution with enhanced governance having been made a priority by the supervisory authority and industry stakeholders themselves. Today, there is a high number of skilled independent directors available to serve Private Equity structures.

• Industry associations: In the light of the above evolution, the Luxembourg Private Equity and Venture Capital Association (LPEA) was established in 2010 and counts over 120 member organizations, of which 50 were GPs as of November 2014.

Î SIF:

• By the end of 2013, there were 1,562 SIF registered with € 306.5 bn assets under management • Contrary to SICARs, SIFs may, in principle, be used for any type of investment in transferable values. As

of December 2013, 21 SIFs invested € 0.94 bn in high-risk assets, the terminology used for SICARs, 111 SIFs invested € 10.87 bn in any non-listed assets

• SIFs accommodate a considerable number of vehicles investing in clean technologies, infrastructures and tangible assets such as art, wine, jewellery and similar assets.

Source: CSSF Annual Report 2013


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3.2. Typical Luxembourg Private Equity structures

SICARs, SIFs and SOPARFIs can accommodate any set of legal, tax and governance requirements - both from the investors’ as well as the General Partners’ perspective - that typically arise in the context of setting up Private Equity structures at any level of an investment situation (phase/scope/industry focus) as well as in special situations (e.g. master-feeder structures, acquisition structures etc.).

The table below compares the 3 most commonly used available structures on key criteria when choosing the right form for a Private Equity vehicle.

Besides the existing S.C.S., the AIFMD Law introduced a new legal form, the “Special Limited Partnership” (“S.C.Sp.”, in French the “Société en Commandite Speciale”) a limited partnership without legal personality. This legal form provides for a modernized legal framework for the organization of the GP-LP relationship. It is comparable to the common law Limited Partnership and can be set up under a specific regulatory wrapper regime such as the SICAR or SIF regimes, or without. As of mid-2014, around 200 S.C.Sp. had already been created.

Flexibility Diversification

Î SIFs are eligible for all asset classes Î SICARs are exclusively eligible for risk capital investments

Î SIFs must invest in a diversified asset portfolio (unless set-up as a feeder)

Î SICARs are not subject to diversification requirements Î SOPARFIs have no constraints in terms of investment policy

Structuring Regulation

Î SICAR, SIFs and SOPARFIs are suitable for a large variety of institutional and professional investor types

Î SICARs, SIFs and SOPARFIs may in principle be organised in a fiscally neutral manner

Î SIFs, SICARs and SOPARFIs may benefit from some or all of Luxembourg’s double tax treaty network

Î SICARs, SIFs and SOPARFIs can be organised as limited partnerships

Î SIFs, SICARs and SOPARFIs may be organised using different corporate forms (private limited liability company form, public limited liability company, corporate partnership limited by shares, etc.)

Î SICARs and SIFs are subject to prudential authorisation and ongoing prudential supervision

Î SICARs and SIFs are subject to certain minimum disclosure obligations

Î SOPARFIs are not subject to regulation

Our international investors appreciate the stable and reliable regulatory and fiscal environment offered and sustained by Luxembourg authorities.

Diana Meyel, Partner, Cipio Partners GmbH


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3.3. General Partners/Management

When setting-up a corporate partnership limited by shares (“Société en Commandite par Actions” or “S.C.A.”) or a common limited partnership (“Société en Commandite Simple” or “S.C.S.”), the general partner is typically set-up as a Luxembourg limited liability company. The management of the S.C.A. or S.C.S. can solely be entrusted to a general partner, or to one or several managers.

The general partner will always be personally liable for the partnership’s debts and obligations which cannot be satisfied out of the partnership’s assets. In order to contain this joint and several liability, the general partner will typically (though not always) be organised as a private limited liability company (“S.à r.l.”) or a public limited liability company (“S.A.”). SICARs and SIFs may, however, also be set up in the form of an S.A. or S.à r.l..

The general partner may delegate some of its powers to agents that it may in principle freely determine. For example, the general partner may or may have to nominate an AIF Manager, an investment advisor as well as all service providers in Luxembourg (e.g. central administration and depositary). It may furthermore organise various forums or committees to assist it in various functions. All such delegations and functions need to be organised in such a manner so as to contain the joint and several liability with the general partner only.

3.4. Middle Offices

The growing presence of Private Equity business has prompted both general partners and the services industry to develop middle office activities locally. A significant number of Private Equity houses have created considerable proprietary infrastructure in Luxembourg.

Middle office services are focused on compliance, risk management and corporate governance and are used to dealing with highly complex structures, financial instruments and the active participation in the ultimate investee companies held by the entities organized and operated in Luxembourg.

The AIFMD and its implementing Regulations (Level 2) impose new requirements on managers of (or self-managed) SIFs, SICARs and unregulated vehicles captured by the AIFMD on the necessity inter alia to retain eligible conducting officers, the enhancement of the central administration and substance of the PE structure, the necessity to introduce rules or policies on risk management, compliance, internal audit, transparency, remuneration and conflict of interest situations. The AIFMD Law, the Level 2 measures and CSSF Circular Letters detail the level of functions that may be outsourced and if so, to which degree.

3.5. Back Offices

Please refer to section 9. for a further description of back office and administrative functions.

Although we were already active in Private Equity as a listed company for several years when the SICAR regime was introduced, we immediately recognised the genuine flexibility and efficiency offered by this new legal structure and adopted it to house all our Private Equity activities.

Bruno Lambert, BIP Investment Partners

A growing number of Private Equity houses have created considerable proprietary infrastructure

in Luxembourg.


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4. The Luxembourg Tax EnvironmentOne of the key factors in favour of Private Equity operations in Luxembourg remains its favourable tax environment. A stable tax framework, a highly competitive social security system (for companies, employers and employees) and the lowest VAT rate in Europe greatly contribute to making Luxembourg one of Europe’s most attractive jurisdictions for Private Equity operations and investments. Of key importance remains, however, the double tax treaty network that Luxembourg has built up over many years.

Taxes in Luxembourg at a glance:

Î Attractive effective tax rates Î Broad participation exemption regime Î Significant exemptions from withholding tax on dividends

Î No withholding tax on non-profit linked interest, royalties and liquidation proceeds (in principle)

Î No capital / stamp duties on the sale of shares in a Luxembourg company

Î Use of international exchange of information standards

Î Extensive double tax treaty network Î Transfer pricing and thin capitalization adhering to international standards

Î Advance tax clearance system Î Specific tax regimes for investment funds, securitization activities, IP rights management activities, risk capital and reinsurance

Î Competitive personal income tax regime and low social security contributions for employers and employees

Luxembourg’s Double Tax Treaty Network Luxembourg has bilateral tax treaties with all EU Member States (except Cyprus) and with a number of other countries (including almost all OECD Member States). This network of tax treaties is constantly being expanded.SICARs and SOPARFIs, as Luxembourg taxable companies, are entitled to treaty benefits and therefore benefit from double tax treaties concluded between Luxembourg and third countries.The application of tax treaties to SIFs in a corporate form is to be assessed on a case-by-case basis depending on the wording of the treaty provisions and their interpretation by the relevant foreign authorities. Fiscally transparent SIFs may generally not themselves benefit from treaty provisions due to their tax transparency.

Specific Taxation of Luxembourg PE vehicles The Luxembourg tax environment is extremely beneficial for Private Equity structures, both regulated and unregulated.

• The SOPARFI: As a special purpose corporate vehicle subject to normal corporate taxation and not subject to a specific regulatory regime, the SOPARFI benefits from Luxembourg’s extensive network of double-taxation treaties and from the EU Parent-Subsidiary Directive. Despite being a fully taxable company, the SOPARFI allows for tailor-made structuring providing, under certain conditions, for a full exemption of income and gains upon exit.

• The SICAR: SICARs can be created using different corporate forms.

Î SICARs in the form of a limited partnership (S.C.S): The SICAR, organised in the form of an S.C.S., is tax transparent and thus is not subject to corporate, municipal business and net wealth tax. Income and gains received or realised are thus not subject to tax in the hands of the SICAR. Income and gains may furthermore be paid to investors without any Luxembourg source taxation.

Î SICARs in the form of a corporate partnership limited by shares (S.C.A):The SICAR organised as an S.C.A. is a fully taxable company; income from transferable securities is however exempt under specific conditions; the SICAR in the form of an S.C.A. will equally not be subject to municipal business tax or net wealth tax. Dividend distributions will equally not be subject to taxation at source.

• The SIF: SIFs, whether organised as a limited partnership or a corporate partnership limited by shares, are not subject to any Luxembourg taxes on capital gains or income; the sole tax due is a subscription tax of 0.01% based on the quarterly net asset value. SIFs in corporate form can moreover claim access to certain double tax treaties. Following the vote on 5 November 2014 of the law amending inter alia the laws of 21 June 2005 implementing the EU Savings Directive and certain agreements with associated or dependent territories and abolishing the withholding tax in favour of an exchange of information system, a SIF in the form of an FCP will, with effect as from 1 January 2015, participate in the exchange of information as to the payer and the recipient of interest and payments of similar nature (please refer to section 4.1 – EU Savings Directive).

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01. Albania2

02. Andorra2

03. Argentina2

04. Armenia

05. Austria

06. Azerbaijan

07. Bahrain

08. Barbados

09. Belgium

10. Botswana2

11. Brazil

12. Brunei2

13. Bulgaria

14. Canada

15. China

16. Croatia2

17. Cyprus2

18. Czech Rep.

19. Denmark1

20. Egypt3

21. Estonia4

22. Finland

23. France

24. Germany

25. Georgia

26. Greece

27. Guernsey2

28. Hong Kong

29. Hungary4

30. Iceland

31. India

32. Indonesia

33. Ireland1

34. Israel

35. Isle of Man2

36. Italy1

37. Japan

38. Jersey2

39. Kazakhstan

40. Korea (South)

41. Kyrgyzstan2

42. Kuwait2

43. Laos

44. Latvia

45. Lebanon3

46. Liechtenstein

47. Lithuania1

48. Macedonia

49. Malaysia

50. Malta

51. Morocco

52. Mauritius1

53. Mexico

54. Moldavia

55. Monaco

56. Netherlands

Î Effective carried interest structuring Î Extensive double tax treaty network Î Easy access to tax authorities and availability of tax confirmations Î Lowest VAT rate in the EU (15% currently, increasing to 17% from 2015), VAT exemption on management services rendered to SIFs and SICARs and free trade zone for valuable goods

Î Competitive effective tax rates and low social security charges for individuals

Luxembourg: Double Tax Treaty Network

Highlights of Luxembourg Tax Framework for Private Equity:

65. Romania

66. Russia

67. San Marino

68. Saudi Arabia2

69. Senegal3

70. Seychelles

71. Singapore4

72. Slovak Republic

73. MacSlovenia1

74. South Africa

75. Spain

76. Sri Lanka

77. Sweden

78. Switzerland

79. Syria3

80. Taiwan2

81. Tajikistan

82. Thailand

83. Trinidad & Tobago

84. Tunisia1

85. Turkey

86. Ukraine2

87. United Arab Emirates

88. United Kingdom5

3. First treaty being negotiated.4. Replacement treaty signed or initialled but not yet in force5. Replacement treaty being negotiated.

1. Amendment signed and enacted but not yet in force.2. New treaty signed or initialled or signed and enacted but not yet in force.

57. New Zealand3

58. Norway

59. Oman2

60. Pakistan3

61. Panama

62. Poland

63. Portugal

64. Qatar

89. United States1

90. Uruguay2

91. Uzbekistan

92. Vietnam

4 . T h e L u x e m b o u r g Ta x E n v i r o n m e n t


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4.1. Direct taxation of corporations

Luxembourg companies are subject to the following taxes1:

• Income taxes at a combined rate of 29.22% in Luxembourg City in 2014, including municipal business tax and a 7% surcharge for the unemployment fund (a minimum flat corporate income tax of €3,210, including the 7% unemployment fund surcharge, applies to financing and holding companies)

• Annual net worth tax levied at a rate of 0.5% on the company’s worldwide net worth on January 1, subject to certain adjustments (eg., qualifying shareholdings)

Corporate income taxTaxation for Luxembourg entities and permanent establishments:Corporate income tax applies to all tax resident corporations and to Luxembourg permanent establishments of foreign corporations. Partnerships (e.g. general corporate partnerships, common limited partnerships and other forms of companies listed under Article 175 of the Luxembourg income tax act such as civil companies) are regarded as tax transparent for Luxembourg tax purposes and are therefore not subject to corporate income tax. Income distributed by such entities will be considered, from a Luxembourg tax point of view, as flowing through the entity and are thus allocated directly to investors.

Resident taxpayers are liable to tax on their world-wide income, unless income is exempt under the provisions of applicable tax treaties or specific domestic tax law. There is a possibility of obtaining tax credits for foreign taxes paid. Non-resident taxpayers are liable to tax on their Luxembourg-sourced income only, e.g. income realized by and allocable to a Luxembourg permanent establishment.

The thin capitalization rules generally require a debt/equity ratio of 85:15 in the context of financing of participations or real estate. Following the example of other European countries, the Luxembourg direct tax authorities have clarified the tax treatment of Luxembourg group financing companies. Besides appropriate organizational substance, the relevant guidance provides that the equity of the financing company should be sufficient for the functions it performs, the assets used and the risks it assumes. Minimum equity should be at least 1% of the amounts lent with a maximum of € 2 million. In addition this equity should effectively be at risk.

No CFC rules apply in Luxembourg.

Capital gains taxation for non-residents If a non-resident shareholder is resident (for tax purposes) in a country that has a double tax treaty with Luxembourg, the treaty will generally allocate the right to tax to the country of residence of the relevant shareholder. In the event that no such double tax treaty exists or can be applied, capital gains on the sale of shares in a Luxembourg company are subject to tax in Luxembourg only if the non-resident shareholder has held a substantial interest in the Luxembourg company and the transfer occurs within 6 months after the acquisition (i.e. thereby representing a speculative gain) or in the event of a transfer after 6 months or more, the non-resident shareholder has been a Luxembourg resident taxpayer for more than 15 years and has become a non-Luxembourg taxpayer less than 5 years before the alienation takes place. For this purpose, a substantial interest exists if a shareholder, either alone or together with certain close relatives, has held a shareholding of more than 10% in a Luxembourg company at any time during the five year period preceding the transfer.

For non-resident corporations, corporate tax will be levied at a rate of 22.47% (for 2014) on any income allocated to a Luxembourg permanent establishment.

1 All figures are applicable as of the time of publication.


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Municipal business taxMunicipal business tax varies from 6% to 12% (levied on income of businesses operating in Luxembourg), depending on the municipality where companies have their registered office. For companies operating in the city of Luxembourg, the rate is 6.75%. A deduction of € 17,500 applies to the municipal business tax base for entities liable to corporate income tax (€ 40,000 for other businesses). Municipal business tax is cumulative with corporate tax and is non-deductible.

Net wealth taxThe net wealth tax is levied at a rate of 0.5% on the company’s worldwide net worth on 1 January of each year. Inter alia qualifying IP and shareholdings under the participation exemption regime net of allocable debt (allocable debt that exceeds the value of the shareholding is deductible against other assets) are excluded from the taxable base. Luxembourg corporate income tax is creditable to the net worth tax provided certain conditions are met. Luxembourg real estate is valued on a certain unitary value for net wealth tax purposes which is only a fraction of the current market value (generally less than 10% of the actual value).

Withholding taxesA withholding tax of 15% is levied on dividend payments (17.65% if the dividend tax is not charged to the shareholder) unless an applicable tax treaty provides for a lower rate or the Luxembourg participation exemption regime reduces withholding tax to 0%. Liquidation proceeds are not subject to withholding tax. Arm’s length fixed or floating rate interest payments are generally not subject to withholding tax unless the EU Savings Directive applies. The withholding tax applicable under the EU Savings Directive will no longer apply with effect from 1 January 2015. Interest paid on certain profit sharing bonds and profit sharing interest paid on loans is subject to 15% withholding tax unless a lower tax treaty rate applies. Royalty payments are not subject to withholding tax provided they are not connected with non-resident artists’ performances and sportsmen’s activities in Luxembourg.

Tax Law on Intellectual Property (“IP”) Luxembourg’s IP Tax Law provides for an 80% tax exemption of income derived from intellectual property as well as capital gains realized on the disposal of such intellectual property. Only 20% from the net income out of IP rights will be taxed at 29.22% which provides an effective tax burden of roughly 5.8%. Qualifying IP assets held by Luxembourg companies are also exempt from net wealth tax of 0.5%.

The aim of the IP Tax Law is to encourage companies to invest more in research and development activities.

Conditions that need to be fulfilled:

• The IP must have been created or acquired after 31 December 2007• The expenses in connection with the IP must be recorded as an asset in the balance sheet for the first

accounting year for which the application of the regime is applied for• The IP may not have been acquired from a person who qualifies as an “affiliated company”, however, the

definition of an affiliated company is limited to direct shareholder relationships, or sister companies with the same direct shareholder.

EU Savings DirectiveOn 1 July 2005 Luxembourg introduced a withholding tax of initially 15% on interest paid through a Luxembourg paying agent (usually a bank) to an individual or residual entity (within the meaning of Article 4 (2) of the Luxembourg Law of 21 June 2005 transposing the EU Savings Directive into Luxembourg law; in general, residual entities are entities other than legal entities, entities taxed as legal entities and UCITS) resident of or established in the EU or one of the dependent or associated territories that have agreed to adopt similar measures to those provided for under the EU Savings Directive. The final withholding tax rate is 35% since 1 July 2011. No withholding tax will be due in the event that the beneficial owner consents to the exchange of information.

Luxembourg corporate income tax is creditable to the net worth tax provided certain conditions are met.



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A draft law has been deposited which proposes that with effect from 1 January 2015, the withholding tax will be replaced by a system of exchange of information regarding the payer and recipient of the interest between the tax authorities of Luxembourg and the territory of residence of the recipient.

Value Added Tax (“VAT”)The Luxembourg VAT standard rate of 15% (which is going to be increased to 17% from 1 January 2015) is the lowest in the EU, compared with an average of 21% in the other EU Member states. The Luxembourg VAT regime furthermore exempts management services provided to investments funds from VAT. Since July 2013, the exemption is available for all alternative investment funds covered by the law of 12 July 2013 transposing the AIFMD, including unregulated funds. This exemption is applicable on portfolio management services, administrative services and most services of depositary banks. Due to this exemption and the low VAT rate, the VAT burden of SICAR, SIF, and other alternative investment funds is very limited. This exemption is however not available to SOPARFIs unless they qualify as AIF. Assuming their activity is limited to the ownership of shares, SOPARFIs are not obliged to register for VAT except in the unlikely case they acquire goods from abroad. They cannot recover the VAT incurred on their costs.

Luxembourg has no “use and enjoyment” rule obliging, as in some Member States, holding companies, which are not VAT taxable persons, to self-assess the local VAT on services received from non EU service providers without allowing the deduction of this VAT.

A Freeport, operational since September 2014, in the vicinity of Luxembourg airport, benefits from the VAT-free zone regime on transactions in valuable goods, including their storage. Certain types of investment funds (i.e., passion funds, investing into art and other collectibles) may take advantage of the Freeport.

Registration duty and transfer taxesA fixed registration duty of € 75 is due upon incorporation and modification of the articles of association of a Luxembourg company or upon transfer of the statutory seat or place of central administration of a company to Luxembourg.

Transfer taxes on the sale of local real estate amount to 7% or 10%.

Tax treatment of carried interestIn the law transposing the AIFM directive, a regime for the taxation of carried interest from AIFs was also introduced.

The share of profits derived from an AIF and paid to AIFM employees is treated as ordinary income and thus subject to the highest marginal rate of tax for the recipient (43.6% for 2014) on global income. However if the employee satisfies certain conditions, the carried interest would be taxable at one quarter of the global tax rate.

The conditions to be fulfilled are:1. The recipient was not resident in Luxembourg, nor subject to Luxembourg tax on his/her professional income during the 5 preceding years2. The recipient becomes Luxembourg tax resident3. No advance payment were received by the recipient4. The entitlement to carried interest is conditional on the investors having priority in recovering their initial investment

The individual can benefit from this tax treatment for up to 10 years after having started his/her professional activity in Luxembourg.

The beneficial tax rates do not apply to capital gains realised on the sale of interests in the AIF, which are subject to standard capital gains rules.

Non-resident taxpayers are only subject to income

tax on Luxembourg-sourced income.


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Implications of OECD BEPS projectIn February 2013, the Organization for Economic Development (OECD) issued a report entitled “Addressing Base Erosion and Profit Shifting” (BEPS), followed by an action plan with 15 actions in July 2013 (Action Plan). The BEPS project is supported by the G20 and is not limited to OECD member countries only, but also includes a number of developing countries. The Action Plan is intended to prevent taxpayers operating internationally from shifting profits to low- or no-tax jurisdictions and thereby reducing their tax base. The OECD released some of the recommendations under the Action Plan in September 2014, but the majority of policy recommendations will only be finalized by the end of 2015. While BEPS was not aimed at the fund sector, many of the actions and recommendations will likely have an impact on Private Equity and Venture Capital funds and/or their portfolio companies. Already published OECD recommendations include rules to deal with hybrid instruments and entities, a review of harmful tax practices of Member States and associated countries, a framework for mandatory spontaneous information exchange on tax rulings covering certain regimes, rules against treaty abuse as well as an update of transfer pricing rules for intangibles assets. In addition, groups would be required to draw up a “country-by-country-report” that is to be made available to tax authorities and should allow tax authorities to get a more global view on a group’s worldwide operations, also functioning as a risk-assessment tool. The actions that the OECD is still working on include rules regarding interest deductions and transfer pricing rules for “high-risk transactions”, which includes the treatment of management fees.

So far, most recommendations are still in draft form and there is currently no obligation for OECD Member States to implement them. Nevertheless, many countries have started to consider or already implement some of the solutions suggested by the OECD. As a result, the international tax environment is changing more rapidly even than in the past. It will therefore be important to regularly review existing structures to ensure they are not affected by tax law changes implemented as a result of the BEPS project.

4.2. Miscellaneous charges or fees

Chamber of Commerce FeeAll Luxembourg commercial companies are subject to an annual contribution (cotisation) ranging from 0.02% to 0.025% based on the relevant taxpayer’s profit generated in the penultimate fiscal year before the relevant contribution generating year. This contribution is capped at €3,000 for SOPARFIs, however the company in question must be coded with the correct NACE code in order to benefit from this cap.

CSSF FeesPrudential oversight comes at a cost to the entities supervised:

Authorisation: €3,500 for single-compartment structures and €7,000 for multi-compartment structuresAnnual fee: for single-compartment structures €3,000. In case of SIFs, for multi-compartment structures the charge varies according to the number of compartments: 1-5 compartments: €6,0006-20 compartments: €12,00021-50 compartments: €20,000More than 50 compartments: €30,000

The annual fee for SICARs is fixed at €3,000 (single-compartment) and €6,000 (multi-compartment).



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4.3. Personal income taxationLuxembourg is one of the EU Member States with the lowest effective taxes and social security charges for individuals.

Social securitySocial security contributions are computed on the annual gross remuneration capped at €115,261. Self-employed persons are subject to a 23.2% rate on their gross professional income capped at also €115,261.

In addition, employees and self-employed persons are subject to a 1.4% dependency contribution (assurance dépendance) assessed on their annual gross professional income (uncapped). This dependency contribution applies to all income (and not only to employment or self-employed income) in the hands of taxpayers who are subject to the Luxembourg mandatory State social security regime.

Income taxResident taxpayers are subject to income tax on their worldwide income. Non-resident taxpayers are only subject to income tax on Luxembourg-sourced income. Taxable income is assessed on the basis of total income less exemptions, deductible expenses and allowances. The law provides for many exemptions and deductions especially for families with children. Income tax is progressive with rates between 0% and a maximum 40% and is assessed on the basis of the taxpayers’ family status. This tax rate is itself increased by an employment fund contribution of 7% or 9% (depending on the family status and level of income) resulting in a top marginal rate of 43.60%. An additional 0.8% temporary financial crisis contribution is levied against persons affiliated to Luxembourg social security.

In principle personal tax is assessed on the basis of an annual tax return that must be lodged by taxpayers. A withholding tax is levied on employment income (progressive withholding tax scale) and director’s fees (20% flat withholding). Withholding taxes on employment income and director’s fees are creditable against the taxpayer’s final income tax liability.

A special regime for highly skilled workers (“HSWs”), who are seconded to a Luxembourg undertaking belonging to an international group or are recruited from abroad by a Luxembourg undertaking, is applicable since 1 January 2011. This special regime consists - subject to certain conditions – of an exemption from Luxembourg personal income tax on certain expenses and allowances paid to or on behalf of HSWs due to their expatriation. However these expenses and allowances remain tax deductible costs for the Luxembourg undertaking.

Net wealth taxThere is no net wealth tax for individuals.

Inheritance/Gift taxInheritance tax is due on the value of all property inherited from a Luxembourg resident whereas transfer tax is due on the value of real property located in Luxembourg that is inherited from a non-resident.

Where the heir is a direct descendant or a spouse with children, there is in principle no inheritance tax liability.Gift tax rates vary according to the degree of kinship between the donor and the donee, ranging from 1.8% to 14.4%.

Mangrove’s activity, both on the investor as well as the portfolio level, is highly international. Luxembourg is all set to provide the instruments you need to set up international investment projects – since the home market is small, everything is geared to accommodate the legal, fiscal and regulatory requirements to invest both in Europe and overseas. Concerning fund formation and management you can achieve all you need towards your investors here in Luxembourg and there are no structural disadvantages. In addition the Government is keen to diversify the economy and open for exchange with GPs.

Hans-Jürgen Schmitz, Mangrove Capital Partners

L U X E M B O U R G P R I VAT E E Q U I T Y & V E N T U R E CA P I TA L A S S O C I AT I O N5 . P r i v a t e E q u i t y – L e g a l F r a m e w o r k

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5. Private Equity – Legal Framework

Private Equity vehicles in Luxembourg are either non-regulated companies or structures that are supervised by the Luxembourg Commission de Surveillance du Secteur Financier (“CSSF”).

The CSSF regulates SICARs and SIFs. SIFs are regulated under the provisions of the law dated 13 February 2007 on the specialized investment funds (the “SIF Law”) while SICARs are regulated under the provisions of the amended law of 15 June 2004 (the “SICAR Law”). Both SICARs and SIFs are registered on official lists maintained by the CSSF..

The CSSF also regulates accessory services, such as:• Registrar agents• Depositaries• Professionals providing fund transfer services• Company domiciliation agents• Client communication agents• Administrative agents of the financial services industry• IT systems operators of the financial services industry• Professionals providing company management services• Auditors

As of 15 September 2014, 323 entities with Professional of the Financial Services (“PSF”) status were registered with the CSSF employing 15,100 persons.

5.1. Luxembourg Private Equity unregulated and regulated structures

Unregulated structuresThe most common non-regulated Private Equity structure in Luxembourg is the SOPARFI. SOPARFIs are in fact ordinary commercial companies which are governed by the amended Luxembourg law of 10 August 1915 on commercial companies (the “1915 Law”) and by the amended law of 20 December 2002 on annual accounts (the “2002 Law”).

As an ordinary company subject to the 1915 Law the SOPARFI is not subject to any risk-spreading requirements and may in principle invest in any asset class. SOPARFIs are used to invest and manage financial participations in Luxembourg or foreign companies. SOPARFIs can also undertake commercial activities which are directly or indirectly connected to the management of their holdings including the debt servicing of their acquisitions.

Regulated structuresAmidst an international regulatory environment seeking to increase transparency and oversight the SICAR and the SIF are Luxembourg’s two tried-and-tested regulated Private Equity frameworks. The legal framework applicable to SICARs and SIFs offers a combination of a flexible and accessible regulatory infrastructure with strong investor protection features. The CSSF oversees both vehicles. They can only be subscribed to by “well-informed” investors (see the Glossary for a more detailed definition).

SICAR:SICARs are investment vehicles designed specifically to suit the needs of Private Equity and Venture Capital. SICARs allow direct or indirect contributions of assets to be made to entities in view of their launch, development or listing on a stock exchange. In excess of 280 SICARs have been launched since inception in 2004.

SIF:SIFs were created to replace a predecessor regime which was no longer suitable. In particular, with Luxembourg starting to position itself as an alternative funds domicile, the time was ripe for a complete overhaul of the then existing legal and regulatory framework. The SIF regime was thus created in 2007 in order to clearly establish Luxembourg as an AIF domicile further accommodating all alternative asset classes and hedge funds, real estate funds and private equity funds in particular.


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5.2. Important aspects of Luxembourg Private Equity vehicles

SIF (regulated) SICAR (regulated) SOPARFI (unregulated)

Regulationlight

Regulation none

Choice of Corporate Form

Corporate form Î Public limited company (S.A.) Î Private limited company (S.à r.l.) Î Corporate partnership limited by shares (S.C.A.)

Î Common limited partnership (S.C.S.) Î Special limited partnership (S.C.Sp.)

Contractual form Î Unit Trust (FCP)

Corporate form Î Public limited company (S.A.) Î Private limited company (S.à r.l.) Î Corporate partnership limited by shares (S.C.A.) Î Common limited partnership (S.C.S.) Î Special limited partnership (S.C.Sp.)

Tax Treatment

Transparent: Î Unit Trust (FCP) Î Common limited partnership (S.C.S.) Î Special limited partnership (S.C.Sp.)

Not transparent (taxable vehicle in Luxembourg):

Î All corporate forms (see above)

Tax Treatment

Transparent: Î Common limited partnership (S.C.S.) Î Special limited partnership (S.C.Sp.)

Not transparent (taxable vehicle in Luxembourg): Î Public limited liability company (S.A.) Î Private limited liability company (S.à r.l.) Î Corporate partnership limited by shares (S.C.A.)

DurationUnlimited or limited period of time

Form of securities Î Shares1: ordinary, preference, beneficiary Î Partnership interest (for S.C.S. and S.C.Sp.) Î Redeemable Î Voting and non-voting Î Founder and ordinary shares Î Bonds and/or notes

Listing Possible (only for FCP, S.A. and S.C.A.)

RedemptionPossible but not mandatory

Capital calls / DistributionsCapital calls and distributions to investors are subject solely to the rules provided for in the constitutive documents

Flexibility on issue price (except where NAV calculation in specific cases)Preferential rights may be limited or cancelled

Capital calls / DistributionsCapital calls and distributions to investors are subject to the rules provided in the constitutive documentsFlexibility on issue pricePreferential rights may be limited or cancelled

Permissible asset classesAny kind of asset class

Restricted asset classes Investment in risk capital(broad definition of “risk capital”)

Permissible assetsAny kind of assets

Risk spreading Risk diversification requirement

Risk spreadingNo risk diversification requirement

1 Where shares are issued in bearer form, the law requires them to be deposited with an eligible depositary.


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CompartmentsPossible

CompartmentsNot possible

Capital

Î Fixed or variable Î € or foreign currency equivalent Î Minimum of €1,250,000 (including share premium), to be reached within 12 months of authorisation provided at incorporation

Î Minimum of €12,500 for S.à r.l. and €31,000 for S.A. / S.C.A.

Î Partly paid shares must be paid up to at least 5%

Î No restriction for S.C.S. / S.C.Sp. Î Contribution in kind and/or in cash permissible

Î Commitment or subscription based model

Capital

Î Fixed or variable Î € or foreign currency equivalent Î Minimum of €1,000,000 (including share premium) to be reached within 12 months of authorisation, provided at incorporation

Î Minimum of €12,500 for S.à r.l. and €31,000 for S.A. / S.C.A.

Î Shares must be paid up to at least 5% Î No restriction for S.C.S. or S.C.Sp. Î Contribution in kind and/or in cash permissible


Capital

Î Fixed Î € or foreign currency equivalent Î Minimum of €12,500 for S.à r.l. and €31,000 for S.A./ S.C.A. at incorporation only

Î Shares must be paid up to 25% for S.A./ S.C.A. and 100% for S.à r.l.

Î No restriction for S.C.S. or S.C.Sp. Î Contribution in kind and/or in cash permissible


Management bodies Î Board of directors, manager(s) or managing general partner – dependent on corporate form Î Approval of board members by the CSSF Î No nationality/residency requirement

Management bodies Î Board of directors, manager(s) or managing general partner – dependent on corporate form

Î No approval requirements for board members by the CSSF

Î No nationality/residency

Supervisory reporting Î Monthly reporting Î Annual audited report due 6 months after year end.

Supervisory reporting Î Semi-annual reporting Î Annual audited report due 6 months after year end.

Supervisory reportingNot applicable

Filing requirements with trade registerWithin 7 months after year end, audited annual accounts and appendix have to be filed.

Filing requirements with trade registerWithin 7 months after year end, audited annual accounts have to be filed.

Filing requirements with trade registerWithin 7 months after year end, annual accounts have to be filed.

DepositaryLuxembourg depositary required

DepositaryNot required

AdministratorCentral administrator to be appointed unless own infrastructure

AdministratorDomiciliation agent unless own Luxembourg infrastructure

AuditorIndependent approved Luxembourg auditor required

AuditorIndependent Luxembourg auditor in certain circumstances only


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5.3. Structuring by means of Luxembourg Vehicles

The following examples illustrate how PE investments could be structured via of a variety of Luxembourg vehicles, including options to locate PE funds themselves in Luxembourg.

Luxembourg structures typically consist of either a SOPARFI, SICAR or SIF or of a combination of the latter two with one or more SOPARFIs.

In the case of an FCP-SIF S.C.S. and S.C.Sp. qualifying as a tax transparent structure the use of intermediate companies is usually recommended to benefit from double tax treaties and EU directives that only companies can benefit from, unlike an FCP.

Investors can invest either directly into the Luxembourg vehicle or indirectly via an additional Luxembourg-based or non-Luxembourg-based feeder vehicle.

The legal framework applicable to SICARs and SIFs

offers a combination of a flexible and accessible regulatory infrastructure with strong investor protection features.


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The following charts are examples of typical Luxembourg Private Equity structures:

Direct investment or via a Luxembourg or non-Luxembourg based feeder vehicle into a Luxembourg SOPARFI: the SOPARFI, possibly via a second SOPARFI, invests into a local target company.

ÎExample 2: investment via Luxembourg an S.C.Sp. and a SOPARFI to benefit from double-tax-treaties and the EU Parent-Subsidiary Directive.

ÎExample 1: traditional investment via a Luxembourg SOPARFI. The financing structure respects the thin capitalization rule of 85:15 debt/equity ratio.


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ÎExample 3: investment via Luxembourg S.C.Sp. and a SOPARFI, SICAR or SIF with a Luxembourg General Partner. In case the SIF/SICAR is incorporated as an S.C.A., the General Partner will usually be set up as a limited liability company. Management services to a SICAR/SIF are VAT exempt.

ÎExample 4: investment via foreign feeder entities into Luxembourg S.C.Sp. and several Luxembourg SOPARFIs.


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5.4. Thematic funds

SICARs, SIFs and SOPARFIs are ideally suited for thematic funds. Into this category fall microfinance funds, opportunistic real estate funds, infrastructure funds and impact finance funds. Most of these funds are usually set up in the form of SIFs, while they could also be set up as SICARs, as long as they comply with the risk capital requirement for their investments. This is usually the case for opportunistic real estate transactions, but also of some microfinance funds that provide equity to microfinance institutions.

5.5. Sharia compliant structures

Luxembourg offers a large platform of competencies and service capabilities for the Sharia compliant Private Equity industry. Because of the natural fit between providing capital to enterprises and profit and loss principles of Sharia, Private Equity has become well suited as an asset class for Islamic investors.

Mudarabah and Musharakah, Riba free and Gharar free financial transactions can easily be structured using the SIF and SICAR vehicles.

Luxembourg - a history of innovation in the European Islamic finance market

Luxembourg - a first mover in the European Islamic Finance sector

1978: First islamic finance institution established in a western country

1982: First life insurance company 1983: First Sharia compliant insurance company in Europe 2002: First European stock exchange to enter Sukuk market 2009: - Platform “Al Mi’yar”

- 1st CB from a Western country to join the IslamicFinancial Services Board (IFSB)

2010: - The Luxembourg Central Bank becomes a founding member of the International Islamic Liquidity Management Corporation

- Clarification of tax treatment of Islamic financial arrangements and issuances

Î Luxembourg among the 5 leading Islamic Fund domiciles Î First EU state to issue Sukuks Î 45 Sharia compliant investment funds and sub-funds with more than EUR 5 bn assets under management*

Î 16 Sukuk listed on the Luxembourg Stock Exchange Î 1 Sharia compliant insurance company Î Specialised teams and dedicated services for Sharia compliant investment funds

Î Circular letters of the Luxembourg tax authorities Î ALFI issued “Best Practice Guidelines for Islamic Funds”

*source: ALFI, CSSF, Zawya


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6. Accounting Framework for Luxembourg PE Vehicles

6.1. Accounting Standards

With the exceptions of the unregulated S.C.S and S.C.Sp, which can elect any accounting framework, all Luxembourg vehicles may choose adopting Luxembourg Generally Accepted Accounting Principles (“Lux GAAP”) or International Financial Reporting Standards (“IFRS”). In addition, with the specific approval from the local Accounting Standards Board a company may use any alternative internationally accepted accounting framework such as US GAAP.

6. 2. Valuation Rules

As a general rule, Luxembourg accounting rules have always been a primarily prudence-focused framework permitting the booking of investments at cost less durable impairment with the recognition of only unrealized losses and not unrealized gains in the profit and loss accounts of a company. In recent years, with the creation of vehicles such as the SICAR and the SIF and harmonization derived from recent EU accounting directives, the possibility of using Fair Value in the financial statements of Luxembourg companies has been introduced. Depending upon the corporate structure and nature of a Private Equity Vehicle different valuation principles are thus allowed.

Companies adopting IFRS as accounting framework have to apply valuation policies depending upon the type of instruments being valued. Under Lux GAAP there is a certain level of additional flexibility and possible choices as outlined in the table below:

Type of vehicle / Regulatory framework Valuation under Lux GAAP

UnregulatedS.C.S. and S.C.Sp.

The valuation rules to follow can be freely determined in partnership agreement

Other unregulated vehicle

Valuation rules are governed by the Law of 19 December 2002, as amended.

There are two valuation options:a) Acquisition cost/principal less any durable impairmentb) Fair Value.

The choice of which method to use rests with the management of the company. As a general rule companies tend to adopt option a).

SICAR, SIF

SICARs are obliged to account their investments at Fair Value. SIFs are also required to account investments at fair value unless their constitutional documents specify otherwise. Generally the prospectus, Private Placement Memorandum (“PPM”) or the Offering Memorandum (“OM”) will contain more detailed explanations with regard to the valuation methodology.

The International Private Equity and Venture Capital (“IPEVC”) guidelines are typically used as a reference basis for calculating the Fair Value of Private Equity type investments.

L U X E M B O U R G P R I VAT E E Q U I T Y & V E N T U R E CA P I TA L A S S O C I AT I O N6 . A c c o u n t i n g F r a m e w o r k fo r L u x e m b o u r g P E Ve h i c l e s

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6.3. Consolidation

6.3.1. Unregulated VehiclesPrinciples: Luxembourg law requires that limited liability companies that control another company prepare and publish consolidated financial statements. S.C.Sp. are not required to produce consolidated financial statements and S.C.S. are required to apply Luxembourg law related to consolidation when limited partners are entities with limited responsibilities. Consolidation is not required in the following cases:

ÎExemptions1. Sub-group exemption: any parent company which is also a subsidiary undertaking of a parent undertaking

not governed by the law of a Member State of the European Community is exempted from the obligation to draw up consolidated accounts and a consolidated annual report under certain conditions.

2. Threshold exemption: consolidation is not required for consolidated groups which do not exceed the following metrics: balance sheet total: €17.5m / total turnover: €35m / total employees: 250. However, the «threshold exemption» is not applicable in case the relevant company is listed on a regulated stock exchange in the EU.

3. Financial Holding exemption: no consolidation is required if the parent company has not intervened in the management of the subsidiary, has not exercised its voting rights in respect of the appointment of the management within the current and the last 5 years, has not granted loans to the subsidiary and, if the conditions were met, has received an exemption granted by the Luxembourg authorities.

4. Specific consolidation exemption for Private Equity: In December 2009, the Luxembourg Ministry of Justice issued a Notice relating to the 1915 Law that allows companies not to present consolidated financial statements in case six conditions are fulfilled:

a. The company is subject to the 1915 Law and is held by one or more well-informed investorsb. The company’s exclusive corporate object is to invest in risk capital, which is defined as direct or indirect contribution of funds to one or several entities in view of their launch, development and their listing on a stock exchange. These investments are held with the intention to sell them at a profitc. An ex-ante exit strategy has been formally defined and documented in writing, communicated to investors, and it is part of the investment policy, implying the intention to divest on a mid-term basis (generally 3 to 8 years)d. The company’s objective is to provide its investors with the benefit of the results of the management of its investments in return for the risk which they incure. If the investments are not carried at Fair Value on the face of the balance sheet, the Fair Value is disclosed in the notes to the financial statementsf. Any event, guarantee or uncertainty that might have a significant impact on the entity’s ability to continue as a going concern, on its cash-flow situation, on its available liquidities or on its solvency has to be disclosed adequately in the notes to the annual accounts.

We looked at different jurisdictions but soon realised that no other country could compete in offering an environment that benefited the fund, our investors and portfolio companies so positively.

Guillermo Morales, Executive Chairman of GGM Capital


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ÎExclusionsSpecific investments may be excluded from the consolidation requirement if they meet one of five possible exclusions as set out by the 1915 Law. These are: immateriality, severe restrictions, disproportionate costs, temporary holdings or diverging activities.However, in this case, the consolidated accounts will still have to be published in Luxembourg according to the local requirements and the notes to the annual accounts of the exempted company must disclose the name and registered office of the parent undertaking and the exemption from the obligation to draw up consolidated accounts and a consolidated annual report.

Î IFRS Exemption from Consolidation Under IFRS 10, an entity is exempted to consolidate its subsidiaries if it qualifies as an investment entity. An investment entity is defined as an entity that:

a. Obtains funds from one or more investors for the purpose of providing those investor(s) with investment management servicesb. Commits to its investor(s) that its business purpose is to invest funds solely for returns from capital appreciation, investment income or both andc. Measures and evaluates the performance of substantially all of its investments on a fair value basis.

An investment entity is however required to account its investment at fair value, through profit or loss.

6.3.2. Regulated Vehicles (SICARs and SIFs)The SICAR and the SIF are specifically exempted from the consolidation requirement.

6.4. Profit RepatriationThrough the use of appropriate financial instruments and an adequate regulated or non regulated structure, the tax charge levied on profit repatriation can be minimized both at investment level and investor level.


Distribution of dividendsNot subject to specific restrictions except compliance with minimal capital requirements and limitations provided for in the articles of incorporation/management regulations.

Distribution of dividendsNot subject to specific restrictions except compliance with minimal capital requirements and limitations provided for in the articles of incorporation.

Distribution of dividendsFor S.A., S.C.A. and S.à r.l. subject to the requirements of the 1915 Law.

Withholding tax on distributionsDistributions, whether paid to resident or non-resident investors, are not subject to withholding tax in Luxembourg. However, if formed as an FCP, some payments may be subject to withholding tax under the European Savings Directive.

Withholding tax on distributionsDistributions, whether paid to resident or non-resident investors, are not subject to withholding tax in Luxembourg.

Withholding tax on distributionsExcept for specific situations, no withholding tax should apply to liquidation proceeds or interest payments. Dividend payments are subject to 15% withholding tax (exemptions are available under certain conditions).

Non residents capital gains taxationNon-residents are not subject to tax in Luxembourg.

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7. The Alternative Investment Fund Managers Directive On 11 November 2010 the European Parliament adopted the Alternative Investment Fund Managers Directive (“AIFMD”). The AIFMD came into force in July 2011 and had to be implemented by 22 July 2013 in all European Member States.

The AIFMD creates a regulatory framework that primarily affects managers of alternative investment funds, as well as alternative investment funds (AIFs) including Private Equity funds based in the EU and, under specific circumstances, managers and investment entities established outside the EU. The AIFMD introduces amongst others a marketing passport (the “Passport”) permitting the offer or placement of qualifying AIFs in all EU Member States without additional authorisation or registration requirements and which is intended to fully replace, after a transitional period still in place for non-EU AIFM or non-EU AIFs, the fragmented national private placement regimes currently existing within some EU Members States.

While many see AIFMD as a burden as it will indeed increase costs for managers, the Passport is equally seen as an opportunity that will make AIFs and Private Equity in particular a more widely accessible and attractive asset class. While the UCITS passport, introduced in 1988, revolutionized the European fund market and put Luxembourg at the forefront, Luxembourg is now determined to provide the same opportunities to Private Equity players under AIFMD.

Luxembourg is a unique place for Private Equity and provides Private Equity houses with advantages not only in terms of political, economic and fiscal stability, infrastructure and manpower but also a legacy of more than 20 years of being the world’s second largest, mature and sophisticated fund domicile.When the regulated Luxembourg Private Equity structures, the SICAR and the SIF, were introduced in 2004 and 2007 respectively, they displayed many of the features that became a standard feature under the AIFMD, i.e. they already have the highest compatibility standard compared to other existing vehicles for Private Equity. Light and pragmatic supervision, stringent custody requirements and sophisticated reporting represent recognised standards in Luxembourg which service providers are familiar with. Last, but not least, the Passport represents the ultimate benefit of the AIFMD, a concept Luxembourg is not only familiar with but for which Luxembourg is recognized worldwide.

The introduction by the law of 12 July 2013 of the S.C.Sp. provides for an attractive revamping of the limited partnership.

AIFMD Passport versus National Private Placement RegimesWhile the distribution of certain AIFs in the EU is still subject to various national private placement regimes (“NPPR”), the introduction of the Passport will enable a non-EU AIFM to market a Luxembourg AIF to professional investors in any Member State without an additional authorisation or registration obligation. The AIFMD requires a precise mapping exercise in order to determine its scope of application. The AIFMD thus applies to:• Luxembourg funds that are managed by non-EU fund managers, for so long as NPPRs have not been phased

out and depending on the decision of each individual EU country (at the latest currently foreseen for 2018)• Managers of some closed-ended AIFs existing at the final date of transposition may benefit from grandfathering

clauses, namely:1. Managers of closed-ended AIFs “which do not make any additional investments” after mid-20132. Managers of fully subscribed closed-ended AIFs which had their final close prior to July 2011 and are constituted with a maximum life that requires them to be liquidated by mid-2016 at the latest, with certain exceptions that need to be respected

• Small and mid-sized AIFMs falling below the de minimis thresholds of either €100 million or €500 million (leveraged and non-leveraged respectively)

• Luxembourg SOPARFIs*

• Luxembourg securitization vehicles*

On the distribution of AIFs the next important milestone dates of the AIFMD will be mid-2015 (availability of EU passport for third-country alternative funds and alternative fund managers) and mid-2018 (end of EU national private placement regimes).

* on a case-by-case basis


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On 22 July 2013, the European Commission published Regulations on European Venture Capital Funds (“EuVECAs”) and European Social Entrepreneurship Funds (“EuSEFs”) with the incentive to address a fragmented and dispersed European Venture Capital industry and lay down a common framework of rules across the European Union (“EU”) for EuVECA and EuSEF managers eager to raise capital on a cross-border basis.

As a means to achieving a proper level playing field, the Regulations – which are applicable in EU Member States without any further national implementing measures – submit EuVECA and EuSEF managers to an identical set of rules across the EU such as the composition of the portfolio of funds, eligible investment targets, eligible investment tools and the targeted investor base. The fulfilment of the various rules laid down in the Regulations grant EuVECA and EuSEF managers access to an EU-wide passport for the purpose of marketing distinctively labelled ‘EuVECA’ and ‘EuSEF’ funds.

An interesting parallel may furthermore be drawn in relation to the AIFMD since the Regulations apply to EuVECA and EuSEF managers of AIFs within the meaning of the AIFMD, who are subject to registration formalities with the competent authorities of their home Member States and who manage portfolios of qualifying venture capital funds, whose assets under management do not exceed a threshold of €500 million. Contrary to the AIFMD however, the Regulations shall only apply to EuVECA and EuSEF managers as well as to EuVECAs and EuSEFs which are established in the EU.

8. The Regulation on European Venture Capital Funds

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9. Private Equity Services ProvisionThe dense network of recognized and highly professional service providers is a major component of the success of Luxembourg.

9.1. Context and overview

The Luxembourg Private Equity fund administration sector basically falls into 2 categories: large international administrators servicing all fund ranges, including Private Equity funds, as well as independent local and international specialist administrators.

According to industry information at the beginning of 2013 over 75% of all Private Equity service providers had already implemented or were in the process of implementing dedicated Private Equity desks and systems.

Today, the vast majority of Private Equity administrators offer the full range of central administration services, including domiciliation, administration, accounting, tax filing and company secretarial services to AIF including their controlled special purpose vehicles located in Luxembourg or abroad.

9.2. Depositary services

Depositary services for regulated Private Equity structures comprise the following two specific components: the safekeeping and the monitoring of the structure’s assets.

The depositary services for regulated vehicles are only performed by credit institutions or investment firms. The AIFMD Law permits certain closed-ended AIFs to appoint as depositary non-banking institutions provided the relevant AIF and assimilated structures generally do not invest in assets that must be held in custody (i.e. financial instruments). This depositary function is only open to qualifying PSFs serving as professional depositary of assets other than financial instruments.

9.2.1. Monitoring functionAs Private Equity fund assets are usually not physically safeguarded by the depositary itself, the depositary will have to focus on its oversight duties. In such case the scope of the supervision and oversight function of the depositary implies:• Handling of the legal documentation related to the transactions carried out • Compliance monitoring of the cash and securities flows linked to transactions• Control of any single transaction including settlement• Implementation of an internal verification check list and escalation procedure• Monitoring of subscriptions and redemptions • Valuation duties

9.2.2. Safekeeping of assetsFollowing a steep learning curve after the introduction of the SICAR in 2004, Luxembourg based depositaries are today very well positioned to perform these legal duties under the AIFMD. The know-how of Luxembourg-based depositary institutions in providing a full range of customised services for Private Equity structures is nowadays widely recognized.

The services cover all investment and divestment processes, such as:• Follow-up of board approval process as well as collection of underlying agreements and documentation

related to the transactions• Supervision and monitoring of investments and divestments• Asset registration in the name of the vehicle under the supervision of the depositary• Compliance checks with the investment policy as described in the private placement memorandum/

offering memorandum


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In addition, the depositary, in its role as paying agent or in cooperation with the transfer agent, may also offer, among others, the following services:• Processing of payments linked to the underlying

investments• Collection of interest income and dividends from

underlying investments• Processing of corporate events on underlying

investments• Liaison with local correspondents, lawyers, notaries

and others service providers• Recording of documentation and data back-up• Collateral management services• Tax reclaim management services (withholding

tax treaty)• Collection of subscription proceeds• Payment of redemption amounts• Execution of dividend payments to investors

9.3. Banking services

Luxembourg banks offer cash management services, treasury, foreign exchange management, bridge financing and management of escrow accounts to their Private Equity clients.

9.4. Legal, tax and audit services

Luxembourg avails itself of significant expertise in legal and tax matters through numerous local and international law firms, tax advisors and audit firms experienced in Private Equity structuring and servicing.

Genii Capital not only selected Luxembourg as a basis for its PE Asset Management activity because the company originates from Luxembourg and has sister companies already managing real estate proprietary funds, but mainly for the different tax benefits and pragmatic business approach Luxembourg offers to the Private Equity players in the industries we focus on. There are a multitude of regimes related to sales of online services or Intellectual Property tax optimization that we can use and directly propose to our portfolio companies or targets, mostly innovative and pioneering in their domains. Also, the interaction with the different administrative bodies allows us to have an added value advisory role towards our portfolio companies as well as investors and Limited Partners. The availability of many double tax treaties and the independence of Luxembourg are definitely strategic assets for us, offering a flexible framework for most investment schemes right from the centre of the European Union.

Eric Lux, CEO of Genii Capital

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10. How to set up a Private Equity Fund in LuxembourgThe below table provides an overview of the most relevant steps in setting up a Private Equity structure in Luxembourg. It particularly focuses on those issues that are specific to Luxembourg.

Each project being obviously individual, the table purports to provide general guidelines.

Phases Activities in Luxembourg

Activities outside Luxembourg Comments

Analysis Phase

Domicile of Investors

Countries of target companies Î Choice of Fund Jurisdiction Î Choice of other jurisdictions required in efficient tax structuring

Î Choice of legal/tax advisors

Domicile of Investors

Countries of target companies

Î Choice of Fund Jurisdiction Î Choice of other jurisdictions required in efficient tax structuring

Î Choice of legal/tax advisors

PreparationPhase

Definition of legal and tax structure

Preparation of terms sheet

Selection of all service providers (Central administrator, depository, auditor)

Depository only for SICAR and SIF, auditor depending on certain criteria

Pre-FilingPhase

Preparation of legal documentation

Preparation of application file to the CSSF

Î PPM Î Subscription Agreement Î Articles of Association of all companies

Î CVs of all directors/ managers Î Certificate of good standing Î Service provider agreements Î CSSF “information request for authorization” questionnaire

Î Risk Management & Conflict of Interest Procedures

Only for SICAR and SIF

All legal documentation and filing with the CSSF can be done in English, German or French


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Phases Activities in Luxembourg

Activities outside Luxembourg Comments

Filing Phase

Filing Final presentation of documentation to Limited Partners

Final fundraising stage


Implementation Phase

Approval of the File

Incorporation of the companies

Registration of the company with the Luxembourg Trade and Companies Register (RCS) and publication of the deed of incorporation in the Mémorial

Client Acceptance Procedure (Transfer Agent and GP)

Set-up of fund with service providers

Signature of subscription agreements

First capital call


We at Bamboo Finance recognize that Luxembourg not only offers a stable legal environment but also highly professional service providers for Private Equity funds. Luxembourg evolved as a preferred place of incorporation for many microfinance investment vehicles over the past years and, more recently, impact investment funds.Our investors recognize these advantages. We therefore believe that Luxembourg’s developed infrastructure for impact investment funds will help strengthening its competitive position and attract further funds in the future.

Christian Schattenmann, Bamboo Finance

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1 1 . G l o s s a r y

11. Glossary

AIF:

AIFMD:

AIFMD Law:

Capital Call:

Carried Interest:

CSSF:

EUSD:

FCP:

GP:

ICT:

IFRS:

IMF:

1915 Law:

LP:

LPEA:

Lux GAAP:

PSF:

Alternative Investment Fund as defined in the AIFMD Law.

Directive 2011/61/EU of the European Parliament and of the Council of 8 June 20111 on Alternative Investment Fund Managers and amending Directives 2003/41/EC and 2009/65/EC and Regulations (EC) No 1060/2009 and (EU) No 1095/2010.

The Law of 12 July 2013 implementing Directive 2011/61/EU into Luxembourg law.

Written notice to Limited Partners requesting them to make a capital contribution to the fund vehicle (within the limits of their subscription commitment) in order to permit the fund vehicle to pay for its investments or to pay expenses. Carried interest or carry is a share of the profits of the fund vehicle that is paid to the general partner and/or the investment manager/advisor in excess of the amount that the general partner/manager/advisor contributes to the fund vehicle. In order to receive carried interest, the fund vehicle must first return all capital contributed by the investors, and, in certain cases, the fund must also return a previously agreed-upon rate of return (the “hurdle rate” or “preferred return”) to investors. Commission de Surveillance du Secteur Financier, the Luxembourg supervisory authority of the financial services sector. COUNCIL DIRECTIVE 2003/48/EC of 3 June 2003 on taxation of savings income in the form of interest payments Fonds Commun de Placement, an undivided co-ownership of assets or proprietorship managed by a management company.

The general partner of either a corporate partnership limited by shares (S.C.A.), a common limited partnership (S.C.S.) or a special limited partnership (S.C.Sp.). The managing general partner is normally jointly and severally liable with the partnership for any liabilities which may not be satisfied out of partnership assets.

Information and Communication Technology.

International Financial Reporting Standards.

International Monetary Fund.

Law of 10 August 1915 on commercial companies, as amended.

The limited partner, typically an investor or limited shareholder in a fund vehicle; limited partners enjoy limited liability (i.e., up to the amount invested or committed for investment). Luxembourg Private Equity & Venture Capital Association.

Luxembourg Generally Accepted Accounting Principles.Most frequently used accounting framework in Luxembourg for PE vehicles.

Professionnel du Secteur Financier, a professional of the financial services sector; each PSF is subject to the prior authorisation and ongoing prudential supervision by the CSSF.


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1 1 . G l o s s a r y

RCS:

S.A.:

S.à r.l.:

S.C.A.:

S.C.S.:

S.C.Sp.:

SICAR:

SICAV:

SIF:

SOPARFI:

Subscription Tax:

TMT:

UCI:

UCITS:

VAT:

“Well-informed investors”:

Registre de Commerce et des Sociétés, the Luxembourg register of commerce and companies.

Société Anonyme, public limited liability company.

Société à Responsabilité Limitée, private limited liability company.

Société en Commandite par Actions, corporate partnership limited by shares.

Société en Commandite Simple, common limited partnership.

Société en Commandite Spéciale, a special limited partnership without legal personality introduced into Luxembourg law by the AIFMD Law.

Société d’Investissement en Capital à Risque, investment company investing in risk capital only.

Société d’Investissement à Capital Variable, investment company with variable capital.

Specialized Investment Fund, a collective investment scheme governed by the law of 13 February 2007 on specialised investment funds, as amended.

Société de Partipation Financière, a mere marketing acronym used to designate an ordinary commercial company governed by the 1915 Law and which is used as a vehicle for holding participations in Luxembourg or foreign companies or other instruments.

Also: Taxe d’Abonnement, a tax of 1 basis point assessed on the net asset value and payable by certain collective investment schemes only.

Telecomunication/ Media/ Technology.

Undertakings for Collective Investments, collective investment schemes governed by the law of 17 December 2010 relating to undertakings for collective investment, as amended.

Undertaking for Collective Investments in Transferable Securities, collective investment schemes organbized in accordance with Directive 2009/65/EC of the European Parliament and Council of 13 July 2009 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS).

Value Added Tax.

Well-informed investors are:• Institutional investors• Professional investors• Any other investor who declares in writing that he/she/it is an informed investor, and

either invests a minimum of €125,000 or benefits from an appraisal from a bank, an investment firm or a management company certifying that he/she/it has the appropriate expertise, experience and knowledge to adequately understand the investment made in the relevant collective investment scheme.

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12. Useful References

• Luxembourg Private Equity & Venture Capital Association - LPEA: www.lpea.lu

• Luxembourg fund association - ALFI: www.alfi.lu

• Regulator of the Financial services industry - CSSF: www.cssf.lu

• Luxembourg for Finance, the agency for the development of the financial services industry: www.lff.lu

• List of PSF: www.cssf.lu/en/psf-en/official-list

• List of registered SICARs: www.cssf.lu/fileadmin/files/Listes/Entites_surveillees

• List of registered SIFs: www.cssf.lu/fileadmin/files/Listes/Entites_surveillees

• List of registered AIFMs: www.cssf.lu/fileadmin/files/Listes/Entites_surveillees/liste_AIFM_280814.pdf

• Questionnaire of the CSSF for applications for SICARs: www.cssf.lu/en/sicar

• Q&A of the CSSF concerning SICARs: www.cssf/sicar/questions-et-responses-en matiere-de-sicar

• Questionnaire of the CSSF for applications for any other vehicle regulated by the CSSF (OPC/FIS): www.cssf.lu/formulaires

• List of double tax treaties: www.impotsdirects.public.lu/conventions/conv_vig/index.html

• Law of 1915: www.legilux.public.lu/leg/textescoordonnes/guides/law_commercial_companies

• Law of 12 July 2013 implementing the AIFMD: www.legilux.public.lu/leg/a/archives/2013/0119/index.html

• Law of 28 July 2014 on immobilisation of bearer shares: www.legilux.public.lu/leg/a/archives/2014/0161/index.html

• EuVECA Regulation No. 345/2013: http://old.eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2013:115:0001:0017:EN:PDF

• EuSEF Regulation No. 346/2013 of 22 July 2013: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2013:115:0018:0038:EN:PDF

• Règlement grand-ducal du 28 octobre 2013 relatif aux taxes à percevoir par la CSSF www.cssf.lu/fileadmin/files/Lois_reglements/Legislation/RG_NAT/RGD_281013_taxes_CSSF.pdf


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13. List of LPEA Members

Private Equity Firms

• 3i Luxembourg• AC Nordic Investments S.àr l.• Adiant Solar Opportunities I SA• Advent Life Sciences LLP• Alpha Private Equity Fund Mgnt. Cy.• AMI (Luxembourg)• Aquasourca S.A. • Bain Capital Luxembourg S.à r.l.• Bamboo Finance S.A.• BIP Investment Partners S.A.• Bridgepoint Services S.à r.l.• CapMan Plc• CIE Property S.à r.l. (BC Partners)• Cinven Luxembourg S.à r.l.• Cipio Partners S.à r.l.• CVC Capital Partners (Luxembourg)• DHC Luxembourg V S.à r.l.• EQT Management S.à r.l.• Equinox S.A.• Eurazeo Management Lux S.A.• European Investment Fund• Fieldpoint• Five Arrows Managers• Genii Capital S.A.• GGM Venture Capital• HgCapital (Luxembourg) S.à r.l.

List as of November 2014

• IDI Emerging Markets• IK Investment Partners Luxembourg S.à r.l.• Investindustrial S.A. • (Bi-Invest Advisors S.A.)• LetterOne Holdings S.A.• Lone Star Capital Investments S.à r.l.• Luxempart S.A.• Mangrove Capital Partners• Marguerite Adviser S.A.• Monitor Clipper Partners• Nordic Capital S.à r.l.• Oaktree Capital Management (by OCM

Luxembourg POF IV S.à r.l.)• PAI Partners• Permira Luxembourg S.à r.l.• Riverside• Royalton Partners S.A.• Sofina Private Equity SCA, SICAR• Sting & Partners SCA• SwanCap Investment Management S.A.• The Carlyle Group Lux S.à r.l.• TPG Capital Luxembourg S.à r.l.• Trilantic Capital Partners LP Inc.• Warburg Pincus S.à r.l.• Wert Investment Holdings S.à r.l.• Winvest Conseil S.à r.l.

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Disclaimer:

LPEA believes the information contained in this documentation to be reliable and correct. However, LPEA makes no

representation or warranty (express or implied) as to the accuracy, completeness or continued availability of the information

and data available from this documentation. To the fullest extent permissible under applicable law, LPEA does not accept

any responsibility or liability of any kind, with respect to the accuracy or completeness of the information and data from this

documentation. The information and data provided in this documentation are for general information purposes. It is not legal,

tax or investment advice nor can it take account of your own particular circumstances. If you require any advice, you should

contact a financial or other professional adviser. No material in this documentation is an offer or solicitation to buy or sell any

professional services, financial products or investments.

Private Equity Services Providers

• ABN AMRO BANK (Luxembourg) S.A.• AIG• Allen & Overy Luxembourg• Alter Domus• Arendt & Medernach• Astris S.à r.l.• AtoZ S.A.• AVEGA S.à r.l.• Aztec Financial Services (Luxembourg) S.A.• Baker & McKenzie Luxembourg• Banque de Luxembourg• Banque Privée Edmond de Rothschild• BDO Tax and Accounting • BIL Luxembourg• Bonn & Schmitt• Bonn Steichen & Partners• Brown Brothers Harriman (Luxembourg) S.C.A.• Caceis Bank Luxembourg• Capita Fiduciary S.A. • CBP Quilvest S.A.• Citco Luxembourg• Citibank International PLC.• Clément & Avocats• Clifford Chance• Crestbridge S.A. • Deloitte S.A.• DLA Piper Luxembourg S.à r.l.• DLP Law Firm S.à r.l.• Elvinger, Hoss & Prussen• Ernst & Young• Etude Loesch• Experta Corporate & Trust Services S.A.• Grant Thornton PKF Weber & Bontemps• Halsey Group S.à r.l.• Hogan Lovells (Luxembourg) LLP• ING Luxembourg S.A.• Intertrust (Luxembourg) S.à r.l.• Ipes (Luxembourg) S.à r.l.

• JTC (Luxembourg) S.A.• KBL European Private Bankers S.A.• King & Wood Mallesons (SJ Berwin

Luxembourg)• Kleyr, Grasso Associes• KPMG• Linari Law Firm• Linklaters LLP• Loyens & Loeff• LRI Invest S.A.• Luther Law Firm• Luxembourg International Consulting S.A.• Luxembourg Investment Solutions S.A.• LuxGlobal Trust Services S.A. • Mazars Luxembourg S.A.• MNKS• Ogier• OPF Partners Luxembourg• Oppenheim Asset Management Services• Pandomus• Pictet & Cie (Europe) S.A.• PricewaterhouseCoopers• RBS Global Banking (Luxembourg) S.A.• Roemers Trapp Pautot• Sanne Group (Luxembourg) S.A. • Sedlo Jimenez Lunz • SGG S.A.• Société Européenne de Banque - Intesa

SanPaolo• Société Générale Bank & Trust • State Street (Alternative Investment

Solutions)• Stibbe Avocats• TMF Luxembourg S.A.• United International Management S.A.• Vandenbulke• Vistra Luxembourg S.à r.l• Wildgen, Partners in Law

List as of November 2014

Contributions for this document were provided by the following LPEA members: Elvinger, Hoss & Prussen, Etude Loesch, EY and PwC.

© Copyright, 2014 LPEA

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