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Investment Fundsin LuxembourgA TECHNICAL GUIDE

SEPTEMBER 2007

Investment Funds in LuxembourgA Technical Guide - September 2007

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This publication contains information in summary form and is therefore intended for general guidance only. It is not intended to be a substitute for detailed research or the exercise of professional judgment. Neither Ernst & Young S.A. nor any other member of the global Ernst & Young organization can accept any responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication. On any specific matter, reference should be made to the appropriate advisor.

© 2007 Ernst & YoungAll Rights Reserved. Ernst & Young is a registered trademark.

Contents

Foreword 4

Preface 5

OverviewoftheGuide 7

1. RegulationsApplicabletoInvestmentFunds 9

2. InvestmentandBorrowingRules 21

�. SpecializedUCIsandPensionFundPoolingVehicles �2

4. FormationProceduresandSupervision �9

5. Administration 47

6. IssueandRepurchaseofSharesandPaymentofDividends 52

7. Custodian 56

8. ReportingandAuditRequirements 58

9. Errors,MaterialityandCompensationtoInvestors 6�

10. TaxationofUCIs 68

11. ValueAddedTax(VAT) 74

12. Expenses 79

1�. Marketing 80

14. ManagementCompanies 84

15. CurrentandFutureDevelopmentsinInvestmentFundLegislation 95

Appendices 107

APPENDIXI-WithholdingTaxRatesApplicabletoLuxembourgUCIs 109

APPENDIXII-Glossary 179

APPENDIXIII-Ernst&YoungLuxembourgAssetManagementRelatedPublications 181

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Foreword

Welcometothe2007editionof“InvestmentFundsinLuxembourg-ATechnicalGuide”.

SinceourlasteditioninSeptember2006,theLuxembourgfundindustryhasgrownbyover22%withassetsnowexceedingEuro2trillion1.OverhalfofthetotalincreaseofaroundEuro�67billioncamefromnewnetsales.Thegrowthhascomefromallsub-sectors–traditional,alternative(hedgefunds,privateequityandrealestate)andtheso-calledsophisticatedUCITS.ThesophisticatedUCITSinparticularhavecreatedalotofinterestwithalltheglobalplayerscreatingsuchproductsfortheirclientele.

Luxembourghasfurtherconsolidateditspositionasaninternationalinvestmentfunddistributionhub.Luxembourgcontinuestoenternewmarketsandexpanditsmarketsharewithinitsexistingmarkets.Infactover75%ofallfundswith“true”crossborderdistributionaredomiciledinLuxembourg.Thisleadingpositionisnotanaccidentoffate-ittrulyreflectstheuniquepoolofcriticalcompetenciesthatLuxembourghasestablishedoverthelast20oddyearstoservetheinvestmentfundindustry.Thisisreflectedinpracticaltermsbythedepthofexperienceamongitsserviceproviders,bythespeedtheregulatortransmitsinvestment fund EU directives into domestic legislation and its ability to create innovative legal frameworks to serve theinvestmentfundindustryandbytheproactiveandleadingroleoftheLuxembourgInvestmentFundAssociation(“ALFI”)inshapingEuropeaninvestmentfundregulationsaswellasitscontinuousdialoguewiththekeyactorsoftheglobalinvestmentfundindustry.

Whatdoesthefuturehold?–thereareseveralkeymacrodevelopmentsthatwilldirectlyimpacttheLuxembourgfundindustry.Theseincludetheconvergenceoftraditionalandalternativeassetclasses–infuturemanyoftheexistingalternativestrategiesmaybecreatedassophisticatedUCITSproducts,and,giventhecurrentsub-primeloanissue,theremaybeacloserlookatthelevelofregulationforcertainfundproductswithcertainofthesebeingsubjecttoagreaterlevelofregulation.

Newproducts, especially thosewithinSophisticatedUCITS,will continue to evolve inparticular for the institutional andhighnetworthinvestorswhereinvestmentbanks,globalassetmanagersandindependentboutiqueassetmanagersseenewopportunitiestocreateproductsfortheirclientele.Itwillbeimportantthattherelatedriskmanagementprocesseskeeppacewiththeevolutionofsuchproducts.Asregardsnewmarkets,therewillcontinuetobeinterestingopportunitiesacrosstheglobeespeciallyinAsia(withChinaopeningupitsmarket)andtheAmericas.HereinEuropetherewillbeacontinuedshiftawayfromin-housedistributionmodelstoopen(ataminimumguided)architecturewhereclientsandtheiradviserswillchase“bestinbreed”.

GiventhewaveofnewregulationsandlegislationoverthelastfewyearssuchasUCITSIIIdirectivesandMiFId(andwithmoretocome),therewillbearenewedandincreasedfocusoninterpretationandimplementation.

Asregardsfutureassetflows,againgiventhecurrentsub-primeissueandrelatedmarketvolatilitywearelikelytoexperienceaperiodofconsolidationoverthecomingmonths.TheTraditionalAssetManagersarealsolikelytobenefitfromashift“backtobasics”asfarasinvestmentstrategiesareconcerned.

Wehopethatyoufindthis2007editionuseful.Pleasedonothesitatetocontactuswithanyqueries.

Michael Ferguson Partner-AssetManagementLeaderErnst&YoungLuxembourgS.A.Phone:(+�52)421248�76Email:michael.ferguson@lu.ey.com

� Figures as of 3� May 2007 and the previous �2 month period.

Foreword

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Preface

About Luxembourg

TheGrandDuchyofLuxembourg is a sovereign stateofover2,500 squarekilometers (1,000 squaremiles), borderedbyBelgium,FranceandGermany.

Ithasapopulationofover476,000ofwhich42%areforeigners.ThecityofLuxembourghasapopulationofnearly84,000.Each working day over 1�0,000 cross-border workers travel to the Grand Duchy from neighboring Belgium, France andGermany,makingup44%oftheworkforce.

Luxembourgwasa foundingmemberof theEuropeanUnion (EU)andbelongs toothermajor internationalorganizationsincludingtheUN,NATOandtheOECD.SeveraloftheEU’simportantinstitutionsarelocatedinLuxembourgCity,suchastheEuropeanInvestmentBankandtheEuropeanCourtofJustice.TheEurohasbeentheofficialcurrencyofLuxembourgsince1January1999.

TheofficiallanguagesofLuxembourgareFrench,GermanandLuxembourgish.However,becauseofthesuccessofLuxembourginattractingforeignbusinessandpersonnel,andthelanguageskillsofthelocalpopulation,Englishisnowwidelyusedinthefinancialservicessector.

Luxembourg’seconomyused tobebasedonagricultureandsteel.Since the1970’s,LuxembourgCityhasdevelopedasamajorfinancialcentrewithafavorableenvironmentforinternationalbanksandinvestmentfunds.Luxembourgalsohasaninternationallyrecognizedstockexchange.

About the Investment Fund Industry in Luxembourg

Luxembourghasbecomeoneof the leading locations for investment funds (also referred toasundertakings forcollectiveinvestmentorUCIs).Thefirstfundwasestablishedin1959andtherearenow2,�02fundvehicles,comprising9,900funds(sub-funds and single funds), with net assets of €2.024 billion (as at 31 May 2007), analyzed as follows:

  Number of UCIs Net assets in € bn

  FCP SICAV Other Total FCP SICAV Other Total

2002Law

-PartI(UCITS*-EUpassport) 912 556 1 1,469 571.658 1,088.949 0.009 1,660.616

-PartII 198 �71 9 578 107.282 167.415 2.547 277.244

SIFLaw 150 10� 2 255 56.077 �0.687 0.0�8 86.802

Total 1,260 1,030 12 2,302 735.017 1,287.051 2.594 2,024.662

*Undertakings for Collective Investment in Transferable Securities

ThesuccessofLuxembourginattractinginvestmentfunds,andbecomingamajorfinancialcentre,maybeattributedtopoliticalstability, the authorities’ encouraging attitude to foreign capital and investment, favorable andwell defined legislation, anappropriatetaxregime,theexistenceoftherequiredprofessionalexpertiseandtheavailabilityofmulti-lingualstaff.

LuxembourginvestmentfundsareauthorizedandsupervisedbytheCommissionfortheSupervisionoftheFinancialSector(Commission de Surveillance du Secteur Financier–CSSF).

TheLuxembourgfundindustryhas,since1988,beensuccessfullyrepresentedandpromotedbytheLuxembourgInvestmentFundAssociation(Association Luxembourgeoise des Fonds d’Investissement-ALFI).

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Preface

The Purpose of this Technical Guide

Thepurposeofthistechnicalguideistoprovide,inaclearandconciseformat,anintroductiontoLuxembourgasacentreforfunds,thetypesoffundsavailableandasummaryoftheregulationsapplicabletotheformationandoperationoffunds.ItalsocoverstheregulationsapplicabletomanagementcompaniesbasedinLuxembourg.

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Overview of the Guide

1. Regulations Applicable to Investment Funds

Chapter1providesanoverviewofthelegislationapplicabletoinvestmentfunds,outlinesthechoicesofstructure,andthekeycharacteristicsoffundsundereachoftwofundlaws-the2002Law(theprincipallaw)andtheSIFLaw(relatingtoinformedinvestorfunds).Italsoprovidesalistofthecurrentprimaryregulations.

2. Investment and Borrowing Rules

Chapter2outlinestheinvestmentandborrowingrulesforUCITSfundsandthegeneralrulesforotherfundsunderthe2002Law.ForUCITSfunds,clarificationsarealsoprovidedonriskmanagement.

3. Specialized UCIs

Chapter�outlinestheinvestmentrulesforSIFLawfundsandspecificrulesforthefollowingtypesofspecializednon-UCITSfundsunderthe2002Law:

Hedgefunds

Venturecapitalfunds

Fundsinvestinginfuturesandoptions

Realestatefunds

4. Formation Procedures and Supervision

Chapter4describestheprocedurestobefollowedwhensettingupaninvestmentfundinLuxembourgandtherolesofthevariousinvestmentfundserviceproviders.Itprovidesdetailsofthecontenttobeincludedintheprospectus(forall2002Lawfunds)andsimplifiedprospectus(forUCITSfunds).OngoingsupervisoryrequirementsforfundsandtheconditionsforlistingthemontheLuxembourgstockexchangearealsooutlined.

5. Administration

Chapter5describestherolesandresponsibilitiesoftheLuxembourgcentraladministration.

6. Issue and Repurchase of Shares and Payment of Dividends

Chapter6outlinestherequirementsregardingtheissueandpurchaseofsharesorunits,andthepaymentsofdividends.

7. Custodian

Chapter7describestherolesandresponsibilitiesoftheLuxembourgcustodian.

8. Reporting and Audit Requirements

Chapter8detailstheannualandsemi-annualreportingrequirements,monthlyandannualfinancialinformationtobesenttothecentralagencyresponsibleforthecollectionofsuchinformation,andauditrequirements.

9. Errors, Materiality and Compensation to Investors

Chapter9coversthetreatmentofNAVcomputationerrorsandcompensationoflossesarisingfromnon-compliancewithinvestmentrestrictions.

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Overview of the Guide

10. Taxation of UCIs

Chapter10outlinestaxesappliedtoLuxembourgfunds,includingcapitalduty,subscriptiontax,taxationofdirectors’fees,withholdingtaxesondividendsandrevenues,taxationondissolutionandtheapplicationoftheEUSavingsDirective.

11. Value Added Tax (VAT)

Chapter11describestheVATregimeforservicesprovidedtoLuxembourginvestmentfunds.

12. Expenses

Chapter12liststheformationandannualrunningexpensesofLuxembourginvestmentfunds.

13. Marketing

Chapter1�outlinestherequirementsandprocedureformarketingthesharesofaLuxembourgUCITSinotherEUMemberStates,requirementsformarketingthesharesofaUCITSfromanotherEUMemberStateinLuxembourgandLuxembourgmarketingregulations.

14. Management Companies

Chapter14outlinestherulesapplicabletomanagementcompaniesofLuxembourginvestmentfunds.ThesearedividedintomanagementcompanieswhichmanageUCITSfundsandotherfunds,andothermanagementcompanies.

15. Current and Future Developments in Investment Fund Legislation

Chapter15outlinesregulatorydevelopmentsoverthelastyearrelevanttoLuxembourginvestmentfunds,expectedfutureregulatory developments in Luxembourg, EU clarifications regarding eligible assets for UCITS and the proposals forupdatingoftheUCITSregimeatEUlevel.

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1. Regulations Applicable to Investment Funds

1.1. Introduction

Overview

TheprincipalregulationsapplicabletoLuxembourginvestmentfunds(UndertakingsforCollectiveInvestmentorUCIs)compriselaws,circularsissuedbythesupervisoryauthority,theCSSF,andalsocertainGrand-Ducalregulations.

TheprincipallawonUCIsistheLawof20December2002(the2002Law)whichcameintoeffecton1January200�2.The2002LawconcernsbothUCITS(UndertakingsforCollectiveInvestmentinTransferableSecurities)inPartIoftheLawandotherUCIsinPartIIoftheLaw.

TheotherlawonUCIsistheSpecializedInvestmentFundLawof1�February2007(theSIFLaw).FundsundertheSIFLawmaybedistributedto“informedinvestors”.Thisnewlawreplacedthelawof19July1991applicabletoInstitutionalUCIswhosesharesarenotofferedtothepublic(the1991Law).TheSIFLawprovidescontinuityforsuchfundsby,forexample,continuingtoimplementpreviouslyavailablefundstructuresandnotaddinganyadditionalrestrictions.

Implementation of the European UCITS Directive

The2002Lawimplemented(inPartI)theamendedUCITSDirective(referredtoasUCITSIII).TheamendmentstotheDirectivecomprisedEuropeanDirective2001/107/EC(oftenreferredtoas theManagementCompaniesDirective)andEuropeanDirective2001/108/EC(oftenreferredtoastheProductDirective).

TheUCITSDirectivelegislationenablesUCIstohaveaEuropeanpassportwhichmeansthattheyarefreelymarketablethroughouttheEU(providinglocalmarketingrequirementsaremet).

Recent clarifications of the UCITS regime – eligible assets and marketing in host Member States

InMarch2007, theEuropeanCommissionfinalized its implementingDirective(Directive2007/16/EC)whichsetsoutcriteria for assessingwhetherdifferent typesof financial instrumentsareeligibleassets for inclusion inUCITS funds.TheDirectivecloselyfollowstheadviceoftheCommitteeofEuropeanSecuritiesRegulators(CESR),whichitselfwentthroughanindustryconsultationprocess.TheDirectiveiscomplementedbyCESRguidance(datedMarch2007)ontheapplicationofthesecriteria.TheclarificationsprovidedbytheDirectiveandCESRarecontainedinSection15.�.

TheEuropeanCommissionalsoissuedclarificationsregardingthemarketingofinvestmentfundsinotherMemberStatesinMarch2007.Forfurtherdetails,seeChapter1�.

Proposals to overcome shortcomings of the UCITS regime

TheEuropeanCommission’sGreenPaperinJuly2005highlightedthefollowingshortcomingsoftheUCITSregime:

Bottlenecksandfailuresoftheproductpassport

Sub-standardinvestordisclosures

Proliferationofsmallandinefficientfunds

Obstaclestofunctionalandgeographicspecialization.

Following extensive consultations with the investment fund industry and stakeholders in an attempt to address theseshortcomings,theEuropeanCommissionissueditslongawaitedWhitePaperonEnhancing the Single Market Framework for Investment FundsinNovember2006.

2 The 2002 Law replaced the Law of 30 March �988 (the �988 Law). The �988 Law implemented, in Part I, the original UCITS Directive (UCITS I).

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1Regulations applicable to Investm

ent Funds

InMarch2007,theEuropeanCommissionpublished,itsInitial Orientations of Possible Adjustments to UCITS Directive (85/6��/EC),forpublicconsultation.Thekeyamendmentsproposedcoverthefollowingareas:

Simplificationofthenotificationprocedure

SimplifiedProspectus/KeyInvestorInformation

Facilitatingfundmergers

Implementingmaster-feederstructures

Managementcompanypassport

Supervisorycooperation.

TheInitialOrientationsandtheWhitePaperarefurtherdiscussedinSection15.4.

1.2. Types of Structures of UCIs

UCIsmaybeestablishedunderdifferentstructures.

Inaddition,suchstructuresmaytaketheformofasinglefundoranumbrellafund.

1.2.1. Basic Structures

a) Common Fund

Acommonfund(Fonds Commun de Placement,frequentlyreferredtoasanFCP)issimilartotheunittrustintheUKorthemutualfundintheUSA.Itisaco-proprietorshipwhosejointownersareonlyliableuptotheamounttheyhavecontributed.IthasnolegalpersonalityandmustbemanagedbyaLuxembourgmanagementcompany.

b) Investment Company

(eg investment company with variable capital – sociéte d’investissement à capital variable (SICAV) - investment company with fixed capital-sociétéd’investissementàcapitalfixe(SICAF))

Aninvestmentcompanywithvariablecapital,(frequentlyreferredtoasaSICAV)isalimitedcompanywhosecapitalisalwaysequaltoitsnetassets.Noformalitiesarerequiredforincreasesanddecreasesincapital.

UCIsestablishedasSICAVs(andSICAFsunderPart Iof the2002Law–UCITSSICAFs)arealsosubject to theLuxembourgcommercialcompanylaw(inparticulartheLawof10August1915oncommercialcompanies,asamended–the1915Law)insofarasthelawtheUCIisunder(the2002LawortheSIFLaw)doesnotderogatefromit.

Althoughitisalegalentityanddoesnotrequireamanagementcompany,aUCITSinvestmentcompany,subjecttothe2002Law,musteitherappointanapprovedmanagementcompanyordesignateitselfasaself-managedinvestmentcompanyandcomplywiththerequirementsrelatingtocapital,managementandinfrastructure.

Fixedcapital investmentcompanies (frequentlyreferred toasSICAFs)maybeeitheropen-endedorclosed-ended.ChangestoaSICAF’scapital,whichmaybemadewithinthelimitsofitsauthorizedcapital,requirenotarizationandpublication.Theauthorizedcapitalmaybeincreasedbyageneralmeetingofshareholders.

AsinthecaseofaSICAV,otherinvestmentvehicleswhichareUCITSsubjecttothe2002Lawmusteitherappointanapprovedmanagementcompanyordesignateitselfasaself-managedinvestmentcompanyandcomplywiththerequirementsrelatingtocapital,managementandinfrastructure.

Whilea2002LawSICAVmustbesetupasanpubliclimitedcompany(société anonyme-S.A.),aSIFLawSICAVcanalsotakeotherlegalforms(seeSection1.�.2.).

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1.2.2. Umbrella Funds

Umbrella funds (otherwise known as multiple compartment UCIs) are single legal entities comprising two or morecompartments(sub-funds).TheyarenowthemostfavoredvehicleforthelargerpromotersofUCIs.

MultiplecompartmentUCIsarerecognizedunderArticle1��ofthe2002LawandArticle71oftheSIFLaw.MultiplecompartmentUCIsmaybeconstitutedprovidedtheconstitutionaldocumentsexpresslypermit itandtheprospectusorissuingdocument specifies the investmentpolicyof eachcompartment.Amultiple compartmentUCI is a single legalentity.However,bywayofderogationfromtheLuxembourgCivilCode,theassetsofacompartmentareonlysubjecttotheliabilitiesofthatcompartment(i.e.segregationofassetsandliabilitiesonacompartmentbycompartmentbasis),unlesstheconstitutionaldocumentsstipulatethecontrary.

Investorsmaypurchaseshares(orunitsinthecaseofanFCP)incompartmentswhichhavedifferentinvestmentpoliciesandsegregatedassetsandaccountingrecords.Investorshavetheopportunityto“switch”allorpartoftheirinvestmentfromcompartmenttocompartmentwith,inprinciple,nocharge.Promotersmayconsequentlyretainthoseinvestorswhowishtochangetheirinvestmentstrategy.

Chapter J of Circular 91/75 stipulates the following conditions for multiple compartment common funds (FCPs) andmultiplecompartmentinvestmentcompanies(SICAVsorSICAFs):

a) All multiple compartment UCIs

TheconstitutionofamultiplecompartmentUCImustensurethateachcompartmentistreatedasaseparateentityhavingitsownfunding,capitalgainsandlosses,expenses,etc.

TheopeningofanewcompartmentrequiresCSSFapprovalandaprospectusupdate(forexamplebymeansofaninsert)

AcompartmentmaynotinvestinanothercompartmentofthesameUCI

Haveasinglename

Haveasinglecustodian(whichmayusecorrespondents)

Haveasingleindependentauditor

Unit/shareholdersmay,inprinciple,beabletomovefromonecompartmenttoanotherwithoutcharge

Issueandrepurchaseofunitsofeachcompartmentmustbeexecutedatapriceobtainedbydividingthenetassetvalue(NAV)ofeachcompartmentbythenumberofunitsincirculation

InvestmentandborrowingrestrictionsspecifiedbytheLawmustbecompliedwithbyeachcompartment,exceptthose restrictions relating to significant influence over an issuer which also apply to all compartments takentogether

b) Multiple Compartment FCPs

Haveasinglemanagementcompanyandasingleboardofdirectorsofthemanagementcompany

Haveasinglesetofmanagementregulationswhich(subjecttoanyexceptionsapprovedbytheCSSF)defineforeachcompartmentthesamegeneralrulesofvaluation,supervision,repurchaseandinvestmentrestriction

ManagementregulationsmuststatethecurrencyinwhichthecombinedfinancialstatementsoftheUCIisexpressed,obtainedbyaggregatingthevariouscompartments

Certificatesorotherdocumentsevidencingtherightsofunitholdersmayonlydifferinrespectofthedesignationoftheparticularcompartmentforwhichtheyareissued

c) Multiple Compartment SICAVs and SICAFs

NAVofashareiscalculatedbyreferencetothenetassetsofthecompartmentforwhichthatsharehasbeenissued.Thevalueofsharesinrespectofthesamecompanyconsequentlydiffersfromonecompartmenttothenext

Despite this inequality,eachsharestillgives the right toonevote.TheCSSFrecommends that theequalityofvotingrightsisemphasizedinthestatutes.Inaddition,thestatutesshoulddistinguishbetweendecisionsinwhichallshareholdershaveaninterestandwhicharetakenatthecompany’sgeneralmeetingofshareholdersandthoseconcerningtheparticularshareholdersofonecompartmentwhicharetakenatthegeneralmeetingofshareholdersofthatcompartment

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Everycompanymusthaveacapitalrepresentedbyshares,whichconsequentlyimpliesthat:

Thereisasinglesharecapitalexpressedinasinglecurrency

Thenominalorparvalueisexpressedinthatsamecurrency

Theannualaccountsarealsoexpressedinthatsamecurrency

Consequently,whiletheNAVofeachcompartmentisexpressedinthecurrencyofthecompartment,thesharecapital of the company is expressed in a single currency. The CSSF recommends that this be stated in thestatutes

Thestatutesmust,asforasingleportfoliocompany,listtheconditionsforsuspensionoftheNAVcalculationandtheissueandrepurchaseofshares.Theymustalsoprovidefortheconditionsofsuspensionrelatingtoanindividualcompartment

1.2.3. Co-management and pooling of assets

To ensure efficient portfolio management, and providing the investment policies so permit, management may decidetoco-manage,orpool,certainassetswithina fund(intra-pooling)orbetween twoormoreLuxembourgfundvehicles(extra-pooling).Cross-border poolingbetweendifferent national jurisdictionsmay alsobepermitted.The assets beingco-managedarecommonlyreferredtoasa“pool”.Poolingenablesdifferentcompartmentsofafundorfundstoinvestinapoolorseveralpoolsofassets.Thisarrangementisanadministrativeprocessthatcanreduceinvestmentmanagement,administrationandcustodycostswithoutchangingthelegalrightsandobligationsofshareholders.

Thepoolsarenotlegalentitiesandarenotdirectlyaccessibletoinvestors.Eachoftheco-managedfundsremainsentitledtoitsspecificassets.Wheretheassetsofoneofmorefundarepooledtheassetsofthepoolattributabletoeachfundwillinitiallybebasedonthevalueoftheassetscontributedtothepool.Subsequently,eachfund’sshareofthepoolwillvaryaccordingtowithdrawalsfromandadditionalallocationstothepool.

Eachlineitemheldwithinthepool,aswellasallgainandlossesmadebythepool,mustbeallocatedtoeachfundinvestinginthepoolinaccordancewiththeratioofthepooleachfundisentitledto.

1.3. Establishing New UCIs

2002 Law or SIF Law

NewUCIscaneitherbeestablishedunderthe2002LawonUCIsorundertheSIFLawof1�February2007.

FCP or Investment Company

ThechoiceastowhethertocreateafundasaninvestmentcompanyoranFCPisprimarilybasedontax,operationalandmarketingconsiderations.

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Structure Choice in Schematic Form

Investment Funds created under the 2002 Law

Part I

UCITSInvestmentFunds(qualifyforEuropeanDistributionPassport–maybesoldtoretailand

institutionalinvestorswithminimumformalities).

Part IIInvestmentFunds(donotqualifyforEuropean

DistributionPassport-includeshedge,privateequity,realestateandderivativeinvestmentfunds–maybesoldtobothretailandinstitutionalinvestorsbutsubjecttoeach

country’slocaldistributionrules).

FCPorSICAVorOther(SICAF)InvestmentFundsmaytaketheformofanopenendedlegalentity(SICAV),aclosedendedlegalentity(SICAF),oracontractualformwhichmusthaveamanagementcompany(FCP).Thesedifferententitiesmaycreatesub-funds,each

withadifferentinvestmentpolicy.Therightsofinvestorsandofcreditorsconcerningasub-fundorwhichhaveariseninconnectionwiththecreation,operationorliquidationofasub-fundarelimitedtotheassetsofthatsub-fund(i.e.protected

cellconcept),unlessaclauseincludedintheconstitutionaldocumentsprovidesotherwise.

SICAVsunderthe2002Lawmustbesetupaspubliclimitedcompanies(S.A.s).SICAVs/SICAFscreatedunderPartIofthe2002Lawneedtobeeitherself-managedorappointa

managementcompany.Thisentailsmeetingcertainsubstanceandcapitalrequirements.AllFCPsmusthaveamanagementcompany.ManagementcompaniesofPartIFCPsmustfulfilthesubstanceandcapital

requirementsreferredtoabove.

Investment Funds created under the SIF Law(maybesoldtoinformedinvestorsbutsubjecttoeachcountry’slocaldistributionrules)

FCP or SICAV or Other (SICAF)InvestmentFundsmaytaketheformofanopenendedlegalentity(SICAV),aclosedendedlegalentity(SICAF),oracontractualformwhichmusthaveamanagementcompany(FCP).Thesedifferententitiesmaycreatesub-funds,each

withadifferentinvestmentpolicy.Therightsofinvestorsandofcreditorsconcerningasub-fundorwhichhaveariseninconnectionwiththecreation,operationorliquidationofasub-fundarelimitedtotheassetsofthatsub-fund(i.e.protected

cellconcept),unlessaclauseincludedintheconstitutionaldocumentsprovidesotherwise.

FCP

AllFCPsmusthaveamanagementcompanyestablishedunderLuxembourgLawandwhichcomplieswiththeprovisionsformanagementcompaniesoffunds

under2002Law.

SICAV / SICAFMaybesetupasa:

-publiclimitedcompany(S.A.)-partnershiplimitedbyshares(S.C.A.)

-privatelimitedliabilitycompany(S.àr.l.)-co-operativeorganizedasanS.A.

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1.3.1. UCIs Established under the 2002 Law

a) Definition of a UCI under the 2002 Law

Thefollowingconditionsmustbecompliedwithinordertofallunderthe2002Law:

Collective Investment of FundsTheremustbecollectiveinvestmentoffundswhichisunderstoodtobethemutualinvestmentofcapitalraisedfromindividualinvestors.Suchinvestmentmaybemadeintransferablesecuritiesorotherassets.Theobjectiveofthisinvestmentistoderiveayieldorobtaincapitalappreciation.ConsequentlyaUCImaynormallynotholdparticipationsasthisimplieshavingapositionofinfluenceorevencontrolandanintentiontoholdlong-term.Asanexception,however,UCIswhichinvestinventurecapital(seeSection�.2.2.)mayholdparticipationsasthisisindicativeofthenatureofsuchinvestmentpolicyratherthanadesireforcontrol.

Raised from the PublicThefundsappliedincollectiveinvestmentmusthavebeenraisedfromthepublic.Thepublicisapproachedwhentheraisingoffundsisnotconfinedtoarestrictedcircleofinvestors.

Diversification of RiskThe investmentsarising from thecollective investmentof fundsmustbemadeaccording to theprincipleofdiversificationofrisk,inordertopreventtheriskattachedtoanexcessiveconcentrationofinvestments.

b) Distinction between Part I and Part II UCIs

The2002LawdistinguishesbetweenUCIssetupunderPartI(UCITSwiththeEuropeanpassport)andUCIssetupunderPartII.UCITSarefreelymarketablethroughouttheEUcountrieswithaminimumofformalitieswhilePartIIUCIsmayonlymarketinotherEUcountriesaftercomplyingwiththespecificconditionsstipulatedbytheauthoritiesinthecountryconcerned.PartIIUCIsmayalsobesoldtoretailandinstitutionalinvestors,butaresubjecttoeachcountry’slocaldistributionrules.

c) Requirements of a Part I UCITS

InadditiontocomplyingwiththedefinitionofaUCIinSection1.�.1.a),aUCITSmust:

Investintransferablesecuritiesand/orotherliquidfinancialassets(moneymarketinstruments,cashdeposits,otherUCIsandfinancialderivatives)

Complywithspecificinvestmentrules(seeSection2.2.)

Beopen-ended(investorsareabletoselltheirsharesbacktotheUCI,eitherdirectlyorindirectly)

HaveanapprovedUCITS’managementcompany(underChapter1�ofthe2002Law),oralternativelyinthecaseofaninvestmentcompany(SICAV/SICAF),itisself-managedandcomplieswiththerequirementssimilartothoseofsuchanapprovedmanagementcompany(seed)).

InaccordancewithCircular0�/88,specificallyexcludedfromPartIareUCITS:

Whichareclosed-ended

WhichraisecapitalwithoutpromotingthesaleoftheirsharestothepublicwithintheEU

Thesharesofwhich,undertheirconstitutionaldocuments,mayonlybesoldoutsidetheEU(eventhoughtheymaybequotedontheLSE)

ForwhichtheruleslaiddowninChapter5ofthe2002Law(seeSection2.2.)areinappropriateinviewoftheirinvestmentandborrowingpoliciesandwhensuchpolicies:

Permitinvestmentof20%ormoreofnetassetsinassetsotherthanthosepermittedunderPartI

Permitinvestmentof20%ormoreofnetassetsinventurecapital

Permitborrowingonapermanentbasisandforinvestmentpurposesuptoatleast25%ofnetassets

WhicharemultiplecompartmentUCIswithatleastonecompartmentwhichdoesnotfallunderPartIduetoitsinvestmentandborrowingpolicy.

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d) Requirements of a Self-Managed Part I UCITS

As stated in Section 1.�.1.c), a UCITS investment company (SICAV/SICAF) must either appoint a managementcompany(whichcomplieswithChapter1�ofthe2002Law–seeChapter14)ordesignateitselfas“self-managed”(FCPshavetoappointamanagementcompany).Therequirementsofaself-managedinvestmentcompanyasstatedinArticles27and40ofthe2002LawandinCirculars0�/108and05/185maybesummarizedasfollows:

PriorauthorizationfromtheCSSFmustbeobtained.

Minimum capital at date of authorization is €300,000. (The minimum capital for all UCIs of €1,250,000 has to be attainedwithinsixmonths).

The application must be accompanied by a business plan (program of activity), setting out, inter alia, theorganizationalstructureoftheUCITS.

Thedirectorsareofsufficientlygoodreputeandhaveappropriateexperience.ThenamesofthedirectorsandofeverypersonsucceedingthemmustbecommunicatedtotheCSSF.Theconductofthebusinessmustbedecidedbyatleasttwopersonsmeetingsuchconditions.

WherecloselinksexistbetweentheUCITSandotherparties,theCSSFwillonlygrantauthorizationiftheydonotpreventtheeffectiveexerciseofitssupervisoryfunctions.Norwillauthorizationbegrantediftheregulationsofanon-memberstategoverningsuchlinkedpartiespreventeffectiveexerciseoftheCSSF’ssupervisoryfunctions.

ItmaydelegateitsownfunctionstothirdpartieswiththesameconditionsapplicabletoChapter1�managementcompanies(Article85ofthe2002Law–seeSection14.2.(22)),wherethetermmanagementcompanyshallbeconstruedasSICAV/SICAF.

ItmustcomplywiththerulesofconductapplicabletoChapter1�managementcompanies(Article86ofthe2002Law–seeSection14.2.(2�)),wherereferencetothemanagementcompanyshallbeconstruedasSICAV/SICAF.

Itmayonlymanageassetsofitsownportfolioandmaynot,underanycircumstances,manageassetsonbehalfofathirdparty.

Itmusthavesoundadministrativeandaccountingprocedures,controlandsafeguardarrangementsforelectronicdataprocessingandadequateinternalcontrolmechanisms.

InaccordancewithCircular0�/108of�0July200�,financialinformationhastobesenttotheCSSFonaquarterlybasis.ThereportformatsareincludedasappendicestothisCircular.ReportsaretobereceivedbytheCSSFbythe20thofthefollowingmonth.

1.3.2. UCIs Established under the SIF Law

The1991LawrelatingtoInstitutionalUCIswasreplacedbytheSpecializedInvestmentFundLawof1�February2007(SIFLaw)whichprovidesacompletestand-alonetext.Fundscreatedunderthe1991LawbecamesubjecttotheSIFLawon1�February2007.TheSIFLawprovidescontinuityforsuchfundsby,forexample,continuingtoimplementpreviouslyavailablefundstructuresandnotaddinganyadditionalrestrictions.

a) Definition of a UCI under the SIF Law

Asunderthe1991Law,theprimaryobjectiveofaSIFmustbethecollectiveinvestmentofthefundsraisedfromitsinvestorswhileapplyingtheprincipleofriskdiversification.

Collective Investment of FundsTheremustbecollectiveinvestmentoffundswhichisunderstoodtobethemutualinvestmentofcapitalraisedfromindividualinvestors.

Raised from Informed InvestorsAsstatedinSection1.�.1.,the2002LawonlypermitsUCIswhosefundsareraisedfromthepublic.TheSIFLaw introduces a qualified investor/professional investor scheme.Funds under the 1991 Law could only besoldto‘institutionalinvestors’suchasbanks,insurancecompanies,pensionfunds,largecompaniesandotherinvestmentfunds.

SIFsmustbereservedfor informedinvestorswhoareable tounderstandandassess theriskassociatedwithinvestmentinsuchafund.Aninformedinvestoris:

Aninstitutionalinvestor

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Aprofessionalinvestor

Anyothertypeofinvestorwhohasdeclaredinwritingthatheisaninformedinvestor,andeither

Invests a minimum of €125,000 or

Hasanappraisalfromabank,aninvestmentfirmoramanagementcompany(allofthesewithaEuropeanpassport)� certifying that he has the appropriate expertise, experience and knowledge to adequatelyunderstandtheinvestmentmadeinthefund.

Diversification of RiskThe investmentsarising from thecollective investmentof fundsmustbemadeaccording to theprincipleofdiversificationofrisk.

b) Structuring a SIF

TheSIFmaybestructuredasanopen-endedlegalentity(SICAV),aclosed-endedlegalentity(SICAF)oracontractualformwhichmusthaveamanagementcompany(FCP).

These different entities may create sub-funds each with a different investment policy.The rights of investors andofcreditorsconcerningasub-fundorwhichhaveariseninconnectionwiththecreation,operationorliquidationofasub-fundare limited to theassetsof that sub-fund (i.e. segregationofassetsand liabilitiesonacompartmentbycompartmentbasis),unlessaclauseincludedintheconstitutionaldocumentsprovidesotherwise.

AnFCPmustbemanagedbyamanagementcompanyestablishedunderLuxembourglaw(seeChapter14).

ASICAVoraSICAFcanbesetupasapubliclimitedcompany(SA),apartnershiplimitedbyshares(SCA),aprivatelimitedliabilitycompany(S.àr.l.)oracooperativeorganizedasanSA.

While thesharesorunitsofaSIFLawSICAVorSICAFmustbe fullysubscribed,only5%of theamountof thesubscriptionpershareorunitmustbepaidupincashorbymeansofacontributionotherthancash.

1.4. Summary of Current Primary Regulations

Regulation Brief description

Lawof20December2002onUCIs(the2002Law) GenerallawonUCIs,whichalsoincorporatedtheUCITSIIIamendedDirective.Itisstructuredasfollows:

PartIUCITS(Europeanpassport)

PartIIOtherUCIs

PartIIIForeignUCIs

PartIVManagementcompanies

PartVGeneralprovisions

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Lawof1�February2007onSpecializedInvestmentFunds(SIFs)thesecuritiesofwhicharenotintendedtobeplacedwiththepublic(theSIFLaw)

Thislawreplacedthe1991Lawwithacompletestand-alonetext.Fundscreatedunderthe1991LawbecamesubjecttotheSIFLawon1�February2007.

Law of 10 August 1915 on commercial companies, asamended

This is the basic law on commercial companies. It isapplicable to SICAVs where the law they are under doesnotderogatefromit,and2002LawPartISICAFs(UCITSSICAFs).

3 A credit institution as defined in Directive 2006/48/EC, an investment firm as defined in Directive 2004/39/EC or a management company as defined in Directive 200�/�07/EC.

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Regulation Brief description

Lawof5April199�on theFinancialSector, asamended(the199�Law)

Generallawonthefinancialsectorstructuredasfollows:

PartI:Accesstoprofessionalactivitiesinthefinancialsector

Part II: Professional obligations, prudential rules andrulesofconductinthefinancialsector

PartIII:Prudentialsupervisionofthefinancialsector

Part IV: Reorganization and winding up of certainprofessionalsofthefinancialsector

PartV:Penalties

Part VI: Amendments, repeals and transitionalprovisions

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Lawof20June2005ontheEUSavingsDirective Thislawimplementsthedirectiveonthetaxationofsavingsincomeintheformofinterestpaymentsfromdebtclaims.

Lawof1�July2007onmarketsinfinancialinstruments This law transposes the “Level 1” MiFID Directive(2004/�9/EC).Italsomodifies,inter alia,the199�Lawandthe2002Law.

Circular91/75of21January1991onUCIs4 This substantial Circular (16 chapters) complemented the1988Law.

Circular 02/77 of 27 November 2002 on NAV errors andactivebreachesofinvestmentrestrictions

ThisCircularestablishesrulestobefollowedinthecaseofmaterialnetassetvalue(NAV)calculationerrorsandactivebreachesofinvestmentrestrictions.

Circular02/80of5December2002onUCIswithalternativeinvestmentstrategies(hedgefunds)

This Circular sets out a framework and specifies rulesapplicable to UCIs (not UCITS) which have alternativeinvestmentstrategies.

Circular02/81of6December2002ontheexternalauditandspecificallytherequirementofalongformreport.

This Circular introduced the requirement of a long formreportforeachUCI(institutionalUCIsareexempted)andspecifiesthetopicstobeaddressed.

Circular0�/87of21January200�onthecomingintoforceofthe2002Law

ThisCirculargivesanoverviewoftheimpactofthe2002Law and in particular the transitional provisions. It alsoannounced that therewouldbe furthercirculars issuedonthefollowingtopics:

Rules regarding Luxembourg management companies(seeCircular0�/108)

RulesofconductforLuxembourgcollectiveinvestmentprofessionals

Risk management and valuation techniques forderivativetransactions

ItfurtherconfirmsthatCircular91/75willberealignedtothe2002Lawbymeansofafuturecircular.

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Circular0�/88of22January200�ontheclassification(PartIorPartII)ofUCIsgovernedbythe2002Law

ThisCircularclarifiesthedistinctionbetweenUCIsfallingunderPartIorPartIIofthe2002Law.

Circular0�/97of28February200�onsimplifiedandfullprospectusesandannualandsemi-annualreports

ThisCircularclarifiestheprocedureforthepublicationofsimplifiedandfullprospectusesandannualandsemi-annualreportsunderthe2002Law.Suchdocumentswillbemadeavailableelectronicallytofundsprofessionalsandinvestorsalike by means of a funds registry set up by Centrale de Communications Luxembourg S.A.(CCLux).

4 Circular 9�/75 refers to the �988 Law, the precursor to the 2002 Law. The CSSF is currently reviewing this circular with regard to issuing a circular which complements and is compatible with the 2002 Law (see Circular 03/87). Certain provisions of Circular 9�/75 may still be relevant to funds created under the 2002 Law; some of these provisions may also be relevant to funds created under the SIF Law.

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Regulation Brief description

Circular0�/108of�0July200�onmanagementcompaniesfalling under Chapter 1� of the 2002 Law (managementcompanies with European passport which can manageUCITS) and self-managed investment companies UCITSfallingunderArticle27or40ofthe2002Law

ThisCirculardetailsthemannerinwhichcertainarticlesofChapter1�ofthe2002LawaretobeappliedinpracticeandspecifiesthequarterlyfinancialinformationwhichChapter1� management companies and self-managed investmentcompanies are required to report to the CSSF. It alsoannouncesthattherewillbeafurthercircularonconflictsofinterest.

Circular 0�/122 of 19 December 200� on simplifiedprospectuses

ThisCircular,whichcomplementsscheduleCofAnnexItothe2002Law,providesformoredetailedinformationandalsoclarifiescertainelementsofinformationcomprisedinscheduleC.

Circular04/146of17June2004ontheprotectionofUCIsandtheirinvestorsagainstLateTradingandMarketTimingpractices

ThisCircularclarifiestheprotectivemeasurestobeadoptedbyUCIsandcertainoftheirserviceproviders,fixesmoregeneralrulesofconductforallprofessionalssubjecttoCSSFsupervision and extends the role of the auditor (réviseur d’entreprises)regardingLateTradingandMarketTiming.

Circular 04/151 of 1� July 2004 on the content of listingparticulars

ThisCirculardetailstherequiredcontentsoftheLuxembourgStock Exchange (Bourse de Luxembourg - LSE) listingparticularsinrespectof

shares/unitsissuedbyforeignUCIsnotofferedforsaletothepublicinorfromLuxembourg

transferablesecurities redeemable in/exchangeable forshares/unitsofUCIsortheincome/redemptionofwhichis/arelinkedtoshares/unitsofUCIs.

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Circular05/177of6April2005ontheabolitionofanypriorcontrolbytheCSSFofadvertisingmaterialusedbypersonsandcompaniessupervisedbytheCSSF

This Circular removes the obligation to communicate totheCSSFthecontentofadvertisingmessagesintendedfordistributiontoclientsandtothepublic.

Circular 05/185 of 24 May 2005 on LuxembourgmanagementcompaniessubjecttotheprovisionsofChapter1� of the 2002 Law as well as self-managed investmentcompaniessubjecttotheprovisionsofArticle27orArticle40ofthe2002LawrelatingtoUCIs

This Circular completes Circular 0�/108 as regards theconditionsforobtainingandmaintainingauthorizationformanagementcompanieswhichdonotengage inactivitiesotherthancollectiveportfoliomanagement.

Circular 05/186 of 25 May 2005 on the guidelines of theCommittee of European Securities Regulators (CESR)regardingtheapplicationoftransitionalmeasuresresultingfromdirectives2001/107/ECand2001/108/EC(UCITSIII)amendingdirective85/611/EEC(UCITSI)

ThisCirculardetailstheguidelinesofCESRthataimtoputan end to the divergent interpretations of the transitionalprovisions by the supervisory authorities of the MemberStates of the European Union. The guidelines fix newdeadlines for certain UCITS and certain managementcompanies.

Circular 05/211 of 1� October 2005 on the prevention ofthe use of the financial system for the purpose of moneylaunderingandthefinancingofterrorism

This Circular provides a combined text bringing togetherallprofessionalobligations in relation to the fightagainstmoneylaunderingandterroristfinancing.

Circular 05/226 of 16 December 2005 on the law onprospectusesforsecurities

This Circular provides a general overview of the law onprospectuses for securities and technical specificationsregarding communications to the CSSF of documents forthe approval or for filing and of notices for offers to thepublicandadmissionstotradingonaregulatedmarket,inrelationtothelawrelatingtoprospectusesforsecurities.

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Regulation Brief description

Circular06/257of17August2006ontheimplementationrulesofthelawof9May2006onmarketabuse

ThisCirculardescribesthemainprovisionscontainedinthelawof9May2006.

Circular 06/267 of 22 November 2006 addressesLuxembourgclosed-endUCIswhoseunits/sharesarebeingofferedto thepublicoradmittedto tradingonaregulatedmarketwithin themeaningof the lawof10July2005onprospectusesforsecurities

ThisCircularprovidestechnicalspecificationsregardingthecommunicationtotheCSSF,underthelawonprospectusesfor securities, of documents for the approval or for filingand of notices for offers to the public of units/shares ofLuxembourg closed-end UCIs and admissions of units/shares of Luxembourg closed-end UCIs to trading on aregulatedmarket.

Circular07/277of9January2007onthenewnotificationprocedureinlinewiththeguidelinesoftheCESRregardingthesimplificationoftheUCITSnotificationprocedure

This Circular draws attention to the new notificationproceduresandsetsouttheapproachadoptedbytheCSSFas regards European passports for UCITS following theadoptionofthenewCESRguidelines.

Circular07/280of5February2007ontheimplementationrulesofthelawof9May2006onmarketabuse

ThisCircularisafollow-uptoCircular06/257andprovidesexplanations and guidelines concerning (i) the elementsthat could be indications of market manipulation, (ii) thearrangementsandformatforsuspicioustransactionreports,(iii) the lists tobedrawnupby issuers,orpersonsactingontheirbehalforfortheiraccount,includingthosepersonshavingregularoroccasionalaccess to inside information,and(iv)thenotificationsrelatingtotransactionsconductedby persons discharging managerial responsibilities withinanissuerandpersonscloselyassociatedwiththem,aswellasthemodalitiesforpublicdisclosureofsuchtransactions.This Circular also details buy-back and stabilizationactivitiesfallingundersafeharbourexemptionsandclarifiescertainelementsrelatingtoobligationsimposedbythelawonUCIsintheirroleasissuers,orasthecasemaybe,ontheirmanagement.

Circular 07/28� of 28 February 2007 on the entry intoforceofthelawof1�February2007relatingtospecializedinvestmentfunds

ThisCircularpresentsasummaryofthemainelementsofthelegalframeworkintroducedbytheSIFLaw.

Circular07/�07of�1July2007onMiFID:Rulesofconductinthefinancialsector

This Circular provides clarification regarding certainprovisionsoftheLawandGrand-DucalRegulation,bothof1�July2007,implementingMiFID.

Circular 07/�08 of 2 August 2007 providing guidelinesfor undertakings for collective investment in transferablesecuritiesconcerningtheuseofariskmanagementmethod,aswellastheuseofderivativeinstruments

ThisCircularprovidesguidelinestobefollowedbyUCITS(i.e.fundssubjecttoPartIofthe2002Law)inthecontextoftheimplementationofariskmanagementprocess,therisklimitsapplicable,theuseoffinancialderivativeinstrumentsandinformationtobecommunicatedtotheCSSF.ItreplacesCircular05/176.

Circular07/�09of�August2007onriskspreadinginthecontextofspecializedinvestmentfunds.

ThisCircularclarifiesthedefinitionofriskdiversificationinthecontextoffundsundertheSIFLaw.

Circular07/�10of�August2007onthefinancialinformationtobeprovidedbyspecializedinvestmentfunds

ThisCircularsetsout thefinancial information that fundsundertheSIFLawmustprovidetotheCSSFonamonthlyandannualbasis.

Grand-Ducal Regulation of 21 January 2002 on the feeschargedbytheCSSF

This regulation fixes the fees payable to the CSSF byauthorizedentities in thefinancialsector, includingUCIs,distributorsofsharesofUCIsanddomiciliaryagents.

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Regulation Brief description

Grand-DucalRegulationof14April200�establishingthefixedcapitaldutyforUCIsunderthe2002Law

Duty fixed at €1,250

Grand-DucalRegulationof14April200�onUCIseligibleforthereducedrateofsubscriptiontax(taxe d’abonnement)underthe2002Law

ThisregulationclarifiesconditionsandproceduresforUCIs(subjecttothe2002Law)toobtainthereducedsubscriptiontax.

Grand-DucalRegulationof27February2007onthetermsandamountofthefixedcapitaldutypayablebySIFs

Duty fixed at €1,250

Grand-Ducal Regulation of 27 February 2007 on SIFseligible for the reduced rate of subscription tax (taxe d’abonnement)undertheSIFLaw

This regulation determines the conditions and criteria forSIFstoobtaintheexemptionfromthesubscriptiontax.

Grand-DucalRegulationof27February2007onthetaxestobeleviedbytheCSSF(asamended)

AnnualfixedfeesforaSIFwithmultiplecompartmentsisset at €2,650

FixedfilingfeeforaSIFwithmultiplecompartmentsissetat €2,650.

Grand-DucalRegulationof1�July2007ontheorganizationalrequirementsandoperatingconditionsforinvestmentfirms

Thisregulationtransposes the“Level2”MiFIDDirective(2006/7�/EC). It lays down implementing measures forcertainarticlesofthe199�Law,asamended,inter aliabythelawof1�July2007.

VATCircularNo72�on29December2006 This Circular confirms that investment vehicles whosemanagementisVATexemptbyvirtueofarticle44,§1,d)of the LuxembourgVAT Law have the status of “taxablepersons”forVATpurposes.ThisCircularenteredintoforceon1April2007.

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s2. Investment and Borrowing Rules

2.1. Introduction

Thissectionoutlinesinvestmentandborrowingrulesforinvestmentfundsunderthe2002Law.Chapter�outlinestherulesforSpecialisedUCIs.

Part I and Part II UCIs

TheinvestmentandborrowingrulesforPartIUCITSunderthe2002LawaresetoutinSection2.2.whichcovers:

2.2.1.:2002Law

2.2.2.:Circular07/�08-GuidelinesforUCITSconcerningtheuseofariskmanagementmethodaswellastheuseofderivativeinstruments.ThislatterCircular,issuedbytheCSSFon2August2007,outlinestheimplementationofariskmanagementprocess,therisklimitsapplicable,theuseoffinancialderivativeinstrumentsandinformationtobecommunicatedtotheCSSF.ItreplacesCircular05/176.

Theinvestmentandborrowingrulesforother(PartII)UCIsaresetoutinSection2.�.

Definitions of Transferable Securities, Money Market Instruments and Regulated Market

a) Definitions in Article 1 of the 2002 Law:

“Transferablesecurities”

Transferablesecuritiesmeans:

Sharesandothersecuritiesequivalenttoshares(“shares”)

Bondsandotherformsofsecuritizeddebt(“debtsecurities”)

Anyothernegotiablesecuritieswhichcarrytherighttoacquiresuchtransferablesecuritiesbysubscriptionorexchange,excludingtechniquesandinstruments(seeSection2.2.1.(7)).

“Moneymarketinstruments”

Moneymarketinstruments(MMIs)areinstrumentsnormallynegotiatedonamoneymarket,whichareliquidandwhosevaluecanbedeterminedwithprecisionatanytime.

“Regulatedmarket”

In the context of EU regulated markets, the definition inArticle 1 refers toArticle 1, Item 1� of Directive9�/22/EECandmeansamarketwhichappearsonthelistprovidedbyeachMemberState,functionsregularly,hasregulationsissuedorapprovedbythecompetentauthoritiesandrequirescompliancewithEUreportingandtransparencyrequirements.

b) Circular 91/75 definition of “Regulated market operating regularly recognized and open to the public”:

“Regulated”:theessentialcharacteristicofaregulatedmarketistheclearingwhichpresupposestheexistenceofacentralmarketorganizationfortheprocessingoforders.Suchamarketmayalsobedistinguishedbymultilateralordermatching(generalmatchingofbidandoffersenablingthesettingofasingleprice),transparency(maximuminformationdistributionamongstbuyersandsellersgivingthemthepossibilitytofollowtheevolutionofthemarketsothattheymayensurethattheirordershavebeencarriedoutatcurrentconditions)andtheneutralityofitsorganizer(theorganizer’srolemustbelimitedtorecordingandsupervision)

“Recognized”:themarketmustberecognizedbyastateorbyapublicauthoritywhichhasbeendelegatedbythatstateorbyanotherentitywhichisrecognizedbythestateorbythatpublicauthority,suchasaprofessionalassociation

“Operatingregularly”:securitiesadmittedtothismarketmustbedealtinatacertainfixedfrequency(nosporadicdealings)

“Opentothepublic”:thesecuritiesdealtinthereonmustbeaccessibletothepublic.

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c) Multiple Compartment UCIsInthecaseofmultiplecompartmentUCIs,theinvestmentandborrowingrestrictionsmustbecompliedwithbyallcompartments,exceptthoserelatingtoasignificantinfluenceoveranissuer,whichalsoapplytoallcompartmentstakentogether(ChapterJofCircular91/75).

2.2. Part I UCITS under the 2002 Law

Themaininvestmentandborrowingrulescontainedwithinthe2002LawareoutlinedinSection2.2.1.below.However,tofurtherclarifythedefinitionofeligibleinvestments(“eligibleassets”)foraUCITSincompliancewiththeUCITSDirectives,toensureconsistent interpretationand implementationof theUCITSDirectivesacrossallEUMemberStates, and furthertoCESR’s adviceof26 January2006, theEuropeanCommission issuedaDirectiveon19March2007clarifyingcertaindefinitionsconcerningeligibleassets.MemberStateshaveuntil2�March2008toadoptandpublishthelaws,regulationsandadministrativeprovisionsnecessarytocomplywiththeDirective.MemberStatesmustapplytheseprovisionsfrom2�July2008.CESRissuedguidelinesinMarch2007tocomplementthisDirective.Formoreinformation,seesection15.�.

2.2.1. 2002 LawReferencetoarticleinthe2002Law,chapterofCircular91/75orsectionofCircular07/�08

Transferable Securities and Money Market Instruments

(1) Transferable securities andmoneymarket instrumentswhichare admitted to anofficiallisting on a stock exchange or dealt in on another regulated market which operatesregularlyandisrecognizedandopentothepublicarepermitted.StockexchangesorotherregulatedmarketsusedwhichareoutsidetheEUshouldbespecifiedintheconstitutionaldocuments.

41(1)

Recently Issued Transferable Securities and Money Market Instruments

(2) Recently issued transferable securities and money market instruments not yet listed ordealt inona regulatedmarketarepermittedprovided that the termsof issue includeanundertaking thatapplicationwillbemade foradmission toa stockexchangeoranotherregulatedmarketandthatsuchadmissionissecuredwithinoneyearofissue.

41(1)d)

Units of other UCITS and UCIs

(�) UnitsofUCITSandotherUCIsarepermittedprovidedthat:

SuchotherUCIsareconsideredbytheCSSFtobesubjecttoequivalentsupervisionandthatcooperationbetweenauthoritiesisassured

Thelevelofprotectionforunit-holdersintheotherUCIsisequivalenttoUCITS’rulesonassetsegregation,borrowing,lending,uncoveredsalesoftransferablesecuritiesandmoneymarketinstruments

TheotherUCIspreparesemi-annualandannualreports

No more than 10% of the UCITS’ or the other UCIs’ assets, whose acquisition iscontemplated,can,accordingtotheirconstitutionaldocuments,beinvestedinaggregateinunitsofotherUCITSorotherUCIs.

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41(1)e)

Deposits with Credit Institution

(4) Depositswithcreditinstitutionswhicharerepayableondemandormatureinnomorethan12monthsarepermitted.CreditinstitutionsusedwhichareoutsidetheEUmustbesubjecttoprudentialrulesconsideredbytheCSSFtobeequivalenttothoseintheEU.

41(1)f)

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sReferencetoarticleinthe2002Law,chapterofCircular91/75orsectionofCircular07/�08

Financial Derivative Instruments

(5) Financial derivative instruments which are dealt in on a regulated market or over-the-counter(OTC)arepermittedprovidedthat:

TheunderlyingconsistsofinstrumentspermittedforaUCITS,financialindices,interestrates,foreignexchangeratesorcurrencies,inwhichtheUCITSmayinvestaccordingtoitsconstitutionaldocuments

ThecounterpartiestoOTCderivativesareinstitutionssubjecttoprudentialsupervision,approvedbytheCSSF

TheOTCderivativesaresubjecttoreliableandverifiablevaluationonadailybasisandcanbesoldatanytime.

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41(1)g)

(6) Arisk-managementprocessmustbeemployedwhichenablestheUCITStomonitorandmeasureatany time the riskof itspositions. Itmustemployaprocess foraccurateandindependentvaluationsofOTCderivativeinstruments(seeSection14.2.(10)iv).

42(1)07/�08-II

(7) Techniques and instruments relating to transferable securities and to money marketinstrumentsmaybeemployedprovidedtheyareusedforthepurposeofefficientportfoliomanagement.UndernocircumstancesshallsuchoperationscausetheUCITStodivergefrom its investment objectives. (The CSSF has provided for rules regarding the use oftechniquesandinstrumentsinChapterHofCircular91/75,inparticularforoptions,futures,securitieslending,reposandcurrencyhedgingtocomplementthe1988Law.ItiscurrentlyreviewingthisCircularinordertorealignittothe2002Law).

42(2)

(8) Theglobalexposurerelatingtoderivativeinstrumentsmustnotexceedthetotalnetvalueofitsportfolio.

42(�)07/�08-III

(9) Theprospectusmustprominentlyindicateitspolicyrelatingtoderivativeinstruments. 47

Money Market Instruments Not Dealt in on a Regulated Market

(10) Moneymarketinstrumentsnotdealtinonaregulatedmarketarepermittediftheissueorissuerisregulatedandoneofthefollowingcriteriaismet:

Theyareissuedorguaranteedbyacentral,regionalorlocalauthorityorcentralbankofanEUMemberState,oranon-EUMemberState,orafederation/internationalpublicbodytowhichatleastoneEUMemberStateisamember

Theyare issuedbyanundertakinganysecuritiesofwhicharedealt inon regulatedmarkets

TheyareissuedorguaranteedbyanestablishmentsubjecttoprudentialsupervisioninaccordancewithcriteriadefinedbyEUlaworbyanestablishmentwhichissubjecttoandcomplieswithprudentialrulesconsideredbytheCSSFtobeatleastasstringentasthoseofEUlaw

TheyareissuedbyotherbodiesbelongingtocategoriesapprovedbytheCSSFundervariousspecificconditions.

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Transferable Securities and Money Market Instruments Not Listed or Dealt in on another Regulated Market

(11) No more than 10% of net assets may be invested in transferable securities and moneymarketinstrumentswhicharenotlistedonastockexchangeordealtinonanotherregulatedmarket.

41(2)a)

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Referencetoarticleinthe2002Law,chapterofCircular91/75orsectionofCircular07/�08

Movable and Immovable Property

(12) Movableandimmovablepropertymaybeacquiredbyaninvestmentcompany(SICAV/SICAF)ifitisessentialforitsbusiness.

41(2)b)

Precious Metals

(1�) Preciousmetalsorcertificatesrepresentingthemmaynotbeacquired. 41(2)c)

Ancillary Liquid Assets

(14) Ancillaryliquidassetsmaybeheld. 41(�)

Investment in any one Body and other Related Rules

(15) Companieswhichareincludedinthesamegroupforthepurposesofconsolidatedaccounts,as defined in Directive 8�/�49/EEC or in accordance with recognized internationalaccountingrulesareregardedasasinglebodyforthepurposeofcalculatingthelimits.

4�(5)

(16) Nomorethan10%ofnetassetsmaybeinvestedintransferablesecuritiesormoneymarketinstrumentsissuedbythesamebody.

4�(1)

(17) Nomorethan20%ofnetassetsmaybeinvestedindepositswiththesamebody. 4�(1)

(18) TheriskexposuretoacounterpartyinanOTCderivativetransactionmaynotexceed10%ofnetassetsinthecaseofacreditinstitutionand5%inothercases.

4�(1)07/�08–III

(19) The total valueof transferable securities andmoneymarket instrumentsheld in issuingbodiesineachofwhichisinvestedmorethan5%ofnetassetsmustnotexceed40%ofnetassets.Thislimitdoesnotapplyto:

Deposits and OTC derivatives made with financial institutions subject to prudentialsupervision

Transferablesecuritiesandmoneymarketinstrumentsreferredtoin(21)and(22)

InvestmentsinotherUCITSorUCIs.

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4�(2)

(20) Nomorethan20%ofnetassetsmaybeinvestedinanycombinationofthefollowingwithasinglebody:

Transferablesecuritiesormoneymarketinstruments

Deposits

OTCderivatives.

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(21) The limitof10%in (16) is increased to�5%if the transferablesecuritiesare issuedorguaranteed by an EU Member State or its local authorities, by a non-Member State ofthe EU or by public international bodies of which one or more EU Member States aremembers.

4�(�)

(22) Thelimitof10%in(16)isincreasedto25%forcertaindebtsecuritiesiftheyareissuedbyacreditinstitutionwhoseregisteredofficeissituatedinanEUMemberStateandwhichissubjecttopublicsupervision.Inaddition,thetotalvalueofsuchdebtsecuritiesheldinsuchissuingbodiesineachofwhichisinvestedmorethan5%ofnetassetsmustnotexceed80%ofnetassets.

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sReferencetoarticleinthe2002Law,chapterofCircular91/75orsectionofCircular07/�08

(2�) Thelimitssetoutinpoints(18)–(22)abovemaynotbecombined;thusinvestmentsintransferablesecuritiesormoneymarketinstrumentsissuedbythesamebody,indepositsorderivativeinstrumentsmadewiththisbodyshallundernocircumstancesexceedintotal�5%ofthenetassets.

4�(5)

(24) Thelimitof10%mentionedinpoints(18)–(22)israisedto20%(or,ifjustified,�5%)forinvestmentineithersharesordebtsecurities,orboth,issuedbythesamebodywheretheinvestmentpolicyistoreplicateanindexwhichisrecognizedbytheCSSF.TheCSSFbasesitsrecognitiononthefollowingcriteria:

Compositionoftheindexissufficientlydiversified

Indexrepresentsanadequatebenchmarkfortheparticularmarket

Indexispublishedinanappropriatemanner.

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(25) TheCSSFmayauthorizeinvestmentof100%ofnetassetsinatleastsixdifferenttransferablesecurities,issuedorguaranteedbyanEUMemberState,itslocalauthorities,anon-MemberStateof theEUorpublic internationalbodiesofwhichoneormoreEUMemberStatesaremembers,ofwhichoneissuemaynotaccountformorethan�0%of thetotal(suchauthorizationwouldonlybegivenifitwasexpresslystatedinthearticlesofincorporationandprospectusthatmorethan�5%ofnetassetsisintendedtobesoinvested).

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(26) Nomorethan20%ofnetassetsmaybeinvestedinasingleUCITSorotherUCI,referredtoin(�)(forthepurposesofapplyingthislimit,eachcompartmentofamultiplecompartmentUCIisconsideredasaseparateissuer).

46(1)

(27) No more than �0% of net assets may be invested in aggregate in units of other UCIs(excludingotherUCITS).

46(2)

(28) Where investments are made in other UCIs which are linked to the investing UCITS,subscriptionorredemptionfeesmaynotbechargedtotheinvestingUCITS.

46(�)

(29) WhereasubstantialproportionofnetassetsareinvestedinotherUCIs,theprospectusshalldisclosethemaximumlevelofmanagementfeesthatmaybechargedbothtotheUCITSitselfandtotheotherUCIsinwhichitintendstoinvest.InitsannualreportitshallindicatethemaximumpercentageofmanagementfeeschargedbothtotheUCITSitselfandtotheotherUCIsinwhichitinvests.

46(�)

Significant Influence over an Issuer

(�0) Aninvestmentcompanyoramanagementcompanyactinginconnectionwithallof thecommonfundswhichitmanagesandwhichfallwithinthescopeofPartIofthisLaw,maynotacquireanysharescarryingvotingrightswhichwouldenableittoexercisesignificantinfluenceoverthemanagementofanissuingbody.

48(1)

(�1) AUCITSmayacquirenomorethan:

10%ofthenon-votingsharesofthesameissuer

10%ofthedebtsecuritiesofthesameissuer

25%oftheunitsofthesameUCI

10%ofthemoneymarketinstrumentsissuedbythesameissuer.

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Referencetoarticleinthe2002Law,chapterofCircular91/75orsectionofCircular07/�08

(�2) Therestrictionsof(�0)&(�1)arenotapplicableto:

TransferablesecuritiesandmoneymarketinstrumentsissuedorguaranteedbyanEUMemberStateoritslocalauthoritiesorbyanon-MemberstateoftheEU

Transferablesecuritiesandmoneymarket instruments issuedbypublic internationalbodiesofwhichoneormoreEUMemberStatesaremembers

Sharesheldinanintermediaryincorporatedinanon-MemberStateoftheEUwhichinvestsmainlyinsecuritiesissuedbythatStateandwheresuchholdingistheonlywayinwhichtheUCITScanholdthesesecurities

Sharesheldbyaninvestmentcompanyinthecapitalofsubsidiariescarryingononlythebusinessofmanagement,adviceormarketinginthecountrywherethesubsidiaryislocated,inregardtotherepurchaseofunitsatunit-holders’requestexclusivelyonitsbehalf.

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(��) InthecaseofamultiplecompartmentUCITS,therestrictionsin(�1)limitingtheholdingofsecuritiesofoneissueralsoapplytoallcompartmentstakentogether.

91/75-J

Provisional Derogations from Investment Restrictions

(�4) Theafore-mentionedinvestmentrestrictionsneednotbecompliedwithwhenexercisingsubscriptionrights;howevertheUCITSmustremedythesituationasapriorityobjective.Inaddition, recently formedUCITSmayderogate from(16) to (29)during the first sixmonths.

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Investment in other Compartments

(�5) AcompartmentofamultiplecompartmentUCImaynotinvestinanothercompartmentofthatsameUCI.

Applicationofcompanylaw

Borrowings

(�6) Basically, neither an investment company nor the management company nor custodianactingonbehalfofanFCPmayborrow.However,therearethreeexceptionstothisrule:

Upto10%ofnetassetsborrowedonatemporarybasisonly

Upto10%ofnetassets in thecaseofan investmentcompanymaybeborrowed toacquirepropertyessentialforthebusiness.

The combined amount of such borrowings may not in total exceed 15% of net assets.Thecombinedamountofsuchborrowingsmaynotintotalexceed15%ofnetassets.

Back-to-back loans may be acquired and are not considered as borrowings for the purposesBack-to-backloansmaybeacquiredandarenotconsideredasborrowingsforthepurposesoftheselimits.

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Granting of Loans and Guarantees

(�7) Grantingofloansoractingasguarantoronbehalfofthirdpartiesisnotpermitted(acquiringtransferablesecuritieswhicharenotfullypaidisallowed).

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Short Sales

(�8) Selling securities short is not permitted. However, it may be possible to use derivativeinstrumentstocreatesyntheticshortpositions.

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s2.2.2. Circular CSSF 07/308: Guidelines for UCITS concerning the use of a risk management method, as well as the use of derivative instruments (superseding Circular 05/176)

I. Introduction

Theoverallobjectiveofthiscircularistoprovideguidelinesfortheimplementationofariskmanagementframework.Itcoversorganizational requirements, the scope of risk management relating to each type of risk identified and detailsonalrequirements,thescopeofriskmanagementrelatingtoeachtypeofriskidentifiedanddetailsofrisklimits.TheCircularfocusesonfinancialrisks,namelyglobalrisk,counterpartyriskandconcentrationrisk.

TheCircularalsoprovidesclarificationsof therequirementsregardingfinancialderivativescoveraswellasof thevaluationofOTCderivativesonadailybasis.

TheCircularreplacesCircular CSSF 05/176. The main changes relate to:CircularCSSF05/176.Themainchangesrelateto:

Limitationofglobalriskexposuretomarketrisk

Clarificationofnon-sophisticatedversussophisticatedfunds

IntroductionoftheconceptofrelativeVaRcomplementingthatofabsoluteVaR

Clarificationofcounterpartyriskmitigation

Definitionofconcentrationrisk

ClarificationofthevaluationofOTCfinancialderivatives

CommunicationprocesstotheCSSF

II. Risk Management Process

�. OrganizationFor the purpose of risk management process, a UCITS must “self-assess” itself as “sophisticated” or “non-sophisticated”.Whilea“sophisticated”UCITSmakessignificantuseoffinancialderivativeinstrumentsormorecomplexstrategiesorinstruments,a“non-sophisticated”UCITSwillmakelimiteduseoflesscomplexderivativesorusederivativesonlyforhedgingpurposes.Theassessmentprocessmustbeapprovedbytheboardofdirectorsofthefundandmustbedocumented.

Incaseofachangeofclassification,theCSSFmustbeinformed;theprospectusmayneedtobeupdated.Riskmanagementmustbeindependentoftheunitresponsibleformakingportfoliomanagementdecisions.

TheriskmanagementofasophisticatedUCITS5mustbeaunitwhichmeetswiththefollowingcriteria:

AsufficientnumberofqualifiedandknowledgeablepersonsAppropriatetechnicalandotherresourcesActiveinvolvementoftheconductingpersons(“dirigeants”)Appropriatereportingandfollow-upAppropriateoversightbytheboard

Iftheriskmanagementisdelegated,themanagementcompany(ortheselfmanagedinvestmentcompany)remainsresponsible for ensuring the implementation of adequate risk management that meets the above-mentionedble for ensuring the implementation of adequate risk management that meets the above-mentionedcriteria.

The risk management structure for a non-sophisticated UCITS may be less well developed than that for asophisticatedUCITS.

RisksofsophisticatedUCITSshouldbemeasuredonadailybasisandthoseofnon-sophisticatedUCITSatleastonabi-monthlybasis;the CSSF may grant exceptions.eCSSFmaygrantexceptions.

2. Scope of Risk ManagementRiskmanagementisresponsibleformonitoringthefinancialrisksofaUCITS,focusingparticularattentiononderivativefinancialinstrumentsandtherisksassociatedtherewith.

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Thefollowingproceduresmustbecarriedoutanddocumented by the Risk Management unit:documentedbytheRiskManagementunit:

AssessmentandmonitoringoftheglobalriskAssessmentandmonitoringofthecounterpartyriskassociatedwithOTCfinancialderivativeinstrumentsCheckingandmonitoringoftherequirementsrelatedtoglobalriskandcounterpartyriskAssessmentand/ormonitoringoftheconcentrationlimitsMonitoringandverificationofthecoverrulesAssessmentand/orcontrolofthevaluationofOTCfinancialderivativeinstrumentsRiskreporting

III. Risk Limits

Accordingtothe2002Law,theglobalrisklinkedtofinancialderivativeinstrumentsmustnotexceed100%oftheNetAssetValue(NAV).TheCircularlimitsglobalrisktomarketrisk,unlikeunderCircular05/176inwhichglobalriskincludedcounterpartyrisk.

Market Riska.Anon-sophisticatedUCITSshould,inprinciple,usethecommitmentapproach(unlessitadoptsaninternalmodel,inwhichcaseitmustmeetrequirementsrelatingtosophisticatedUCITS,oradoptsadifferentapproach,withpriorapprovaloftheCSSF).Thetotalcommitmentisconsideredtobethesumoftheabsolutevalueoftheindividualpositions,aftertakingintoaccountnettingandcover.TheCircularprovidesthemethodofcalculationtobeadoptedforthemostcommonfinancialderivativeinstruments.

b.AsophisticatedUCITSmustuseaninternalmodeltakingintoconsiderationgeneralmarketriskaswellasspecificmarketrisk.ThemostcommonlyacceptedinternalmodelistheVaRmodelsupplementedbystresstests.OthermodelscanbeusedprovidedtheyreceiveCSSFapproval.Modelsmustbeback-tested.

TheCircularintroducestwoconceptsofVaRwithdifferentlimits:

If a reference portfolio (or ‘benchmark’) can be determined, the CSSF allows the use of a relativeVaRwheretheportfolioVaRcannotbemorethantwicethereferenceportfolioVaR.Thechoiceofthereferenceportfolioneedstobedulydocumented.

Wherethereisnoreferenceportfolio,anabsoluteVaRfiguremustbecalculated;absoluteVARlimitcannotexceed20%oftheNAV.

TheVaRmodelparameterstobeusedarethefollowing:

confidenceinterval:99%

holdingperiod:1month(20days)

observation period: 1 year (250 days), unless a shorter period is justified by a significant increase ofvolatility

quarterlyupdateofthedata

calculationfrequency:daily

A different confidence interval or holding period may be used with prior approval of the CSSF provided aconversionismadetobringtheVaRtoanequivalentvalue.

Counterparty RiskThe2002LawlimitstheOTCcounterpartyriskexposureto5or10%oftheNAVdependingonthequalityofthecounterparty.TheCirculardescribesa�stepapproachfordeterminingthecounterpartyrisk.

Nettingisauthorized.

Financialassetsprovidedasguaranteescanbeusedtoreducecounterpartyriskexposurebyhavingthecounterpartypostcollateral(intheformofcashdeposits,investmentgradedebtsecuritiesandequitiesorconvertiblebondsincludedinpublicandwellrecognizedindices).Thecollateralmustmeetcertainconditionsincludinglowrisk,liquidity,diversification,lowcorrelationwiththecreditratingofthecounterparty,mark-to-marketvaluationwithafrequencyatleastequaltotheNAVcalculationfrequency;itmustbeappropriatelysafeguardedandavailabletothefundatanytime.

Appropriatehaircutsmustbeapplieddependingonthetypeofcollateral.

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sConcentration RiskConcentrationriskexposureislimitedto20%byentityorgroup.TheCircularextendsthelimitationtosharesofUCITS.

TheCircularfurtherdetailsthecoverrulesapplicabletofinancialderivativeinstruments.Riskmanagementisresponsibleforregularlycheckingthatthecoveravailable,eitherinunderlyingfinancialinstrumentsorinliquidassets,issufficienttomeetfutureobligations.

IV. Valuation of OTC Financial Derivative Instruments

OTCfinancialderivativeinstrumentsmustbeaccuratelyandindependentlyvalued.Suchvaluationshouldalsobeabletobeverifiedonadailybasis.TheUCITSmustbeabletodeterminewithreasonableprecisionthefairvalueofOTCfinancialderivative instruments throughout their lives.A reliableandverifiablevaluationmustmeet the followingcriteria:

Thevaluationmustbebasedonacurrentmarketvalue.Ifsuchamarketvalueisnotavailable,thenthevaluationshouldbebasedonavaluationmodelthatusesarecognizedandacceptedmethodology

Acheckofthevaluationmustbeperformedeitherby:

AnindependentthirdpartywhoperformsacheckonasufficientlyfrequentbasisandfollowingaprocessthatcanbemonitoredbytheUCITS,or

AnunitindependentoftheportfoliomanagementoftheUCITS.TheUCITSmayuseathirdpartyvaluationsystemormarketdatabutmustverifytheiradequacy.ModelsusedbyapartylinkedtotheUCITS(suchasatradingroomthatexecutestheUCITStransactions)areexpresslyprohibitediftheyhavenotbeenreviewedbytheUCITS.

IftheUCITScannotvalueitsOTCderivativesfinancialinstrumentsusingthemethodsdescribedabove,itcannotusethefinancialderivativeinstrumentevenifitsinvestmentpolicypermitsitsuse.

UCITSthatusefinancialderivativeinstrumentsforpurposesotherthanhedgingshouldincludeintheirprospectusadescriptionoftherisks(including,ifappropriate,anindicationoftheleverageandmarketrisk).

V. Information to be communicated to the CSSF

Managementcompanies(orself-managedinvestmentcompanies)mustcommunicatetotheCSSFadescriptionoftheirriskmanagementprocedureimplementedasaresultoftheCircular.Thisdescriptionmustinclude:

Theimplementationoftheriskmanagementprocess

Theorganizationoftheriskmanagementfunction

Alistofthesophisticatedandnon-sophisticatedUCITStowhichtheproceduresapply,aswellasthemarketriskcalculationmethodandreferencedata

Theassessmentandmonitoringofglobalrisk

Commitmentapproach

Listoffinancialderivativeinstrumentsforwhichthecommitmentapproachisused(includingdetailsofthemethodologyforeachtypeofinstrumentandpracticalexamples)

DetailsoftheimplementationoftherequirementsoftheCircular

Detailsofthenettingandcoverpolicies

InternalModelapproach

Listoffinancialderivativeinstrumentsforwhichtheinternalmodelapproachisused

Descriptionoftheinternalmodelused(typeofmethodology,thirdpartyvendormodel,agreedmodel,…)aswellasdetailsoftheimplementationoftherequirementsoftheCircular(e.g.definitionofthereferenceportfolioincaseofrelativeVaR,setupoflimitincaseofabsoluteVaR,….)

Forbothapproaches:

Globalriskmonitoringprocedureandescalationprocedures

Riskindicatorsused(duration,beta,rating,…)

Detailsoftheriskreportingused(frequency,audience,etc.)includinganexampleofthemainreport

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Theassessmentofthecounterpartyrisk

Counterpartyselectionprocess

Detailsofthecounterpartyriskcalculationmethodology

Descriptionofnettingandcollateralagreements

Detailsoftheriskreportingused,includinganexampleofthemainreport

Counterpartyrisksindicators

Theassessmentoftheconcentrationrisk

Roleoftheriskmanagementunitintheassessmentand/ormonitoringofconcentrationrisk

Detailsoftheriskreportingusedincludinganexampleofthemainreport

ValuationofOTCfinancialderivativeinstruments

descriptionofthevaluationprocess(unitincharge,methodsused,typeofcontrols,…)

Monitoringandcontrolofthecoverrules

Descriptionoftheprocessaswellasroleoftheriskmanagementfunction

Detailsofthedeterminationofcoverlinkedtofinancialderivativeinstruments

2.3. Other (Part II) UCIs

a) Introduction

PartIIof the2002LawcontainsnoprovisionsregardinginvestmentorborrowingrulesforsuchUCIs.SuchrulesarespecifiedinCSSFcircularsordeterminedonacase-by-casebasisbytheCSSF.

TheCSSFhastodateissuedrulesorguidelinesforPartIIUCIsinvestinginthefollowingactivities:

Transferablesecurities

Alternativeinvestments(i.e.HedgeFunds)

Venturecapital

Futurescontractsandoptions

Realestate

Seeb)

SeeSection�.2.1

SeeSection�.2.2.

SeeSection�.2.�.

SeeSection�.2.4.

b) Part II UCIs Investing in Transferable Securities

ThefollowingsummarizesinvestmentandborrowingrestrictionsaresetoutinChapterGofCircular91/75.Certainoftheselimitswillnotapplyiftheyarenotcompatiblewiththeinvestmentpolicy.

ThetechniquesandinstrumentsrestrictionssetoutinChapterHofCircular91/75arealsoapplicable.

Unlisted Securities

(1) Nomore than10%ofnetassetsmaybe invested insecuritiesnotquotedonastockexchangeordealt inonanotherregulatedmarket(see,however,(5)).

Investment in any One Security or Issuer

(2) Nomorethan10%ofnetassetsmaybeinvestedinsecuritiesissuedbyanyoneissuer(see,however,(5)).

Significant Influence over an Issuer

(�) Nomorethan10%ofsecuritiesissuedbyanyoneissuermaybeacquired(see,however,(5)).

(4) InthecaseofamultiplecompartmentUCITS,therestrictionin(�)limitingtheholdingofsecuritiesofoneissueralsoappliestoallcompartmentstakentogether.

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(5) Restrictionsin(1)to(�)arenotapplicabletosecuritiesissuedorguaranteedbyMemberStatesoftheOECDortheirlocalauthoritiesorpublicinternationalbodieswithEU,regionalorworldwidescope.

Investment in other UCIs

(6) Restrictionsin(1)to(�)areapplicabletotheinvestmentinotherUCIsoftheopen-endedtypewherethoseUCIsarenotsubjecttoriskdiversificationrequirementscomparabletothosein(1)to(5).Investmentinclosed-endedUCIsispermittedand,subjecttothesamerestrictionsabove,applicabletotransferablesecurities.IfinvestmentistobemadeinotherUCIs(fundoffunds),thismustbeexpresslystatedintheprospectusand,ifsuchinvestmentistobeinotherUCIsofthesamepromoter,theprospectusmustspecifythenatureoffeesandexpensesarising.

Borrowings

(7) Borrowingsofupto25%ofnetassetswithoutanyrestrictionareallowed.LeveragedUCIs(referredtoinCircular0�/88–seeSection1.�.1.)arenotsubjecttothisrestriction.

�2

3Specialized UCIs and Pension Fund Pooling Vehicles

3. Specialized UCIs and Pension Fund Pooling Vehicles

Specialized UCIs include hedge funds, venture capital funds, futures contracts and options funds, real estate funds and pensiondUCIsincludehedgefunds,venturecapitalfunds,futurescontractsandoptionsfunds,realestatefundsandpensionfundpoolingvehicles.TheymaybesetupundertheSIFLaworunderPartIIofthe2002Law.

Inaddition, theLawof15June2004introducedanewvehicle, theSICAR,an investmentcompanyinriskcapital6.Suchvehicles,however, are not UCIs and are not covered in this publication.r,arenotUCIsandarenotcoveredinthispublication.

3.1. Specialized Investment Funds

TheSIFLawmaybeusedtocreateavarietyofdifferenttypesoffunds–i.e.hedgefunds,privateequityfundsandrealestatefunds,orevenfundscombiningdifferentinvestmentstrategiesorassetclasses.SpecializedinvestmentfundssetupundertheSIFLawarenotrequiredtocomplywithanydetailedinvestmentrestrictionsorleveragerules.TheSIFLawsimplystatesthataSIFshouldapplytheprincipleofriskdiversification.

Investment Restrictions

CSSFCircular07/�09onriskspreadinginthecontextofspecializedinvestmentfunds,dated�August2007,complementedtheSIFLawandprovidedclarificationontheinvestmentrestrictionsthatmustbeadheredtoinordertoensureadequateriskdiversification:

(1) ASIFcannot,inprinciple,investmorethan�0%ofitsassetsoritscommitmentstosubscribetosecuritiesofthesamenatureissuedbythesameissuer.Thisrestrictionisnot,however,applicabletoinvestmentsin:

(i) securitiesissued,orguaranteed,byanOECDMemberStateorbyitslocalauthoritiesorbysupranationalbodiesororganizationsofanEU,regionalorworldwidenature.

(ii) targetUCIswhicharesubjecttoriskdiversificationprinciplesthatareatleastcomparabletothoserelevanttoSIFs.EachcompartmentofatargetmultiplecompartmentUCImaybeconsideredasadistinctissuerprovidingthatthesegregationofassetsandliabilitiesonacompartmentbycompartmentbasisisimplemented.

(2) Shortsellingcannot,inprinciple,resultintheSIFholdinguncoveredsecuritiesofthesamenatureissuedbythesameissuerrepresentingmorethan�0%ofitsassets.

(�) Whenusingfinancialderivativeinstruments,theSIFmustensurecomparableriskdiversificationthroughappropriatediversificationoftheunderlyingassets.CounterpartyriskofOTCoperationsmustbelimitedaccordingtothequalityandqualificationofthecounterparty.

TheCSSFmayprovideexemptionsfromtherestrictionslaidoutinCircular07/�09onacase-by-casebasis.However,theCSSFmayalsorequestthatadditionalrestrictionsareadheredto,incasesoffundswithspecificinvestmentpolicies.

SufficientinformationanddocumentationmustbeprovidedtotheCSSFtoenableit todeterminecompliancewiththeinvestmentrestrictions.

Subscription and Payment

ThesharesorunitsofaSIFLawSICAVorSICAFmustbefullysubscribed,only5%oftheamountofthesubscriptionpershareorunitofamustbepaidupincashorbymeansofacontributionotherthancash.Thiswillfacilitatestructuressuchasprivateequityfundstomakecapitalcallsoveraperiodoftime.

Issuing Document

Detailsofhowtheprincipleofriskdiversificationwillbeimplemented,includingquantifiableinvestmentlimits,mustbedisclosedintheissuingdocument.

6 Law of �5 June 2004 regarding investment in venture capital (Société d’investissement en capital à risque - SICAR)

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3.2. 2002 Law Part II UCIs

PartIIofthe2002LawcontainsnoprovisionsregardinginvestmentorborrowingrulesforsuchUCIs;suchrulesspecifiedinCSSFcircularsordeterminedonacase-by-casebasisbytheCSSF.

TheCSSFhastodateissuedrulesorguidelinesforPartIIUCIsinvestinginthefollowingspecializedactivities:

HedgeFunds

Venturecapital

Futurescontractsandoptions

Realestate

Circular02/80

Circular91/75ChapterI.I.

Circular91/75ChapterI.II.

Circular91/75ChapterI.III.

TherulesapplicabletothesespecializedfundsaresetoutinSections�.2.1to�.2.4.below.

3.2.1. Hedge Funds

Introduction

AswellasundertheSIFLaw,alternativeinvestmentfundsmaybesetupunderguidelinesprovidedbyCSSFCircular02/80.

CSSFCircular02/80concernsUCIswhoseinvestmentobjectiveistoadoptso-calledalternativeinvestmentstrategies(i.e.hedgefunds).

TheoverallobjectiveofCircular02/80wastoclarifythelegalandregulatoryframeworkapplicabletosuchproducts.

The Circular’s purpose is to provide a formal framework for establishing regulated hedge fund products which hadpreviouslybeenapprovedonacase-by-casebasis.

It emphasizes the importance theCSSFattaches to the reputation,experienceand financial standingofpromoters, theprofessionalstatusandexperienceoftheexecutivemanagementand,whereapplicable,oftheinvestmentmanagersandadvisers.

TheCSSFmayallowdeparturesfromtheprovisionssetoutintheCircular,wherejustified,orimposeadditionalinvestmentrestrictions,whereappropriate.

Short Selling

Shortsellingmaybecarriedoutsubjecttothefollowingrules:

Aggregatecommitment(i.e.unrealizedlosses)intermsofshortsellingmaynotexceed50%ofassets.

Counterpartyrisk(i.e.thedifferencebetweenthevalueofthesecuritiespledgedandthevalueofthesecuritiesborrowed)perlendermaynotexceed20%ofassets.

Upto10%ofassetsmaybeinvestedinshortpositionsofunlistedsecurities,providedsuchsecuritiesareliquid.

Notmorethan10%ofthesametypeofsecuritiesissuedbythesameissuermaybesoldshort.

Shortpositionsonsecuritiesissuedbythesamebodymaynotexceed10%ofassetsand/orthecommitmentonsuchsecuritiesmaynotexceed5%ofassets.

Borrowing

Borrowingforinvestmentpurposesonapermanentbasisfromfirstclasscreditinstitutionswhospecializeinthistypeoftransactionispermittedsubjecttothefollowing:

Borrowingsmaynotexceed200%ofthenetassets.Consequentlythevalueofthetotalassetsmaynotexceed�00%ofthevalueofnetassets.

Incaseswherethereisahighdegreeofcorrelationbetweenlongandshortpositionsborrowingsmayriseto400%ofnetassets.

Counterparty risk,definedas thedifferencebetween thevalueofassetsgivenasguaranteeand theamountborrowed,cannotrepresentmorethan20%oftheUCI’sassetsperlender.

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Investments in other UCIs (Fund of Funds)

InvestmentsinotherUCIsaresubjecttothefollowingprovisions:

Up to20%ofnet assetsmaybe invested in the securities of the sameUCI.However, in applying this limit eachcompartment of an umbrella structure will be considered as a separate UCI provided that no cross-liability existsbetweenthecompartments.

Upto100%ofthesharesissuedbyasingleumbrellastructuremaybeheld,providedthatthetotalinvestmentinsuchastructuredoesnotexceed50%oftheUCI’snetassets.

Theabovelimitsarenotapplicabletoinvestmentsinopen-endedregulatedUCIswhichapplyadiversifiedinvestmentpolicy.

Long Positions

Longpositionsmustmeetthefollowingcriteria:

Notmorethan10%ofitsassetsmaybeinvestedinunlistedsecurities.

Notmorethan10%ofthesametypeofsecuritiesissuedbythesameentitymaybeacquired.

Exposuretoasingleissuermaynotexceed20%ofassets.

TheaboverestrictionsdonotapplytoinvestmentsinotherUCIsandtosecuritiesissuedorguaranteedbyanOECDMemberStateorbyitslocalauthoritiesorbysupranationalbodiesororganizationsofanEU,regionalorworldwidenature.

Securities Lending

Ingeneral,suchUCIsmaylendthroughastandardsystemorganizedbyarecognizedclearinginstitutionorthroughafirstclassfinancialinstitutionsubjecttothefollowingprovisions:

Collateral(inthecaseofafirstclassinstitutiononly)receivedmustbeatleastequaltothevalueofsecuritieslent.

Securities lentmaynotexceed50%of thevalueof theUCI’sportfoliounless theUCIhas the right tocancel thecontractatanytime.

Lendingcontractsmaynotexceed�0daysunlesstheUCIhastherighttocancelthecontractatanytime.

Financial Derivatives

SuchUCIsareauthorizedtousealltypesofexchangetraded/OTCderivativefinancialinstrumentssuchasoptions,forwardorfuturescontractsaswellasswapcontracts,providedthatthefollowingconditionsaremet:

The UCI’s total commitments arising from such instruments (exchange traded and OTC) and short selling cannotexceedthevalueoftheassets.

Totalmargindeposits(exchangetraded)andcommitmentsarisingfromderivativefinancialinstruments(i.e.unrealizedlossesforOTCinstruments)maynotexceed50%oftheassets.

Sufficientliquidassets(forexample,termdeposits,treasurybills,treasurybondsandmoneymarketinstruments)tofinancemargincallsmustbemaintained.

Borrowingsmaynotbeusedtofinancemargindeposits.

Themarginrequirementsorcommitmentonasinglecontractmaynotexceed5%oftheassets.

Premiumspaidonoptionswithidenticalcharacteristicsmaynotexceed5%oftheassets.

Maynotinvestdirectlyincommodities,althoughitmayholdcommoditiesfuturesandholdpreciousmetalsdealtinonanorganizedspotmarket.

TheUCImarginrequirements/commitmentsinrespectofasinglecommodity/classoffinancialfuturesmaynotexceed20%oftheassets.

UCIswhichusesuchtechniquesandinstrumentsmustincludeintheirprospectusthemaximumtotalleverageeffectinforceandadescriptionoftherisksinherentinsuchtransactions.

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Repurchase and Reverse Repurchase Agreements

Such UCIs may enter into repurchase (repo) and reverse repurchase (reverse repo) agreements as a buyer or a sellerprovidedthatthefollowingconditionsaremet:

Repotransactionsmustbecarriedoutwithfirstclassinstitutions.

SecuritiesacquiredunderarepocontractmaynotbesoldunlesstheUCIhasothermeansofcoverageatitsdisposal.

WheretheUCIactsastheseller,itmustmaintainsufficientliquidassetstorepurchasethesecuritiesonmaturityoftherepocontract.

Minimum Entry Investment

Thereisnominimumlevelofinitialinvestmentbyinvestors.

Breach of Investment Limits

Where an investment limit is breached due to passive reasons (market movements, redemptions), the UCI must takecorrectiveactioninthebestinterestsoftheshareholders.

Prime Broker

Thereisnolimitationontheuseofaprimebrokerotherthancounterpartyrisklimitationmentionedundertheheading‘Borrowing’above.

Prospectus

Theprospectusmustcontainadescriptionoftheinvestmentstrategyandtheinherentrisksandmakereferencetothefactthat:

Potentiallossesfromshortsellingdifferfromthosewheresecuritiesareacquiredforcash.

Theleverageeffectcreatesanopportunityforincreasedyield,butatthesametimeincreasesvolatilityandtheriskofcapitalloss.Borrowingsinvolveaninterestcostwhichmayexceedincomeorgains.

Lowliquiditymaymeaninvestors’redemptionrequestscannotbemet.

TheprospectusmustindicatethatinvestingintheUCIinquestionentailsahigherthanaverageriskandisonlysuitableforinvestorspreparedtolosethetotalvalueoftheirinvestment.

Whereapplicabletheprospectusmustcontainadescriptionofthedealingstrategyasregardsfuturesandoptions,makingreferencetotheirvolatility.

3.2.2. Venture Capital UCIs

Investmentinventurecapitalisdefinedas“investmentinsecuritiesofunlistedcompaniesbecauseeitherthesecompaniesarerecentlyformed,ortheyarestillinthecourseofdevelopmentandthereforehavenotyetobtainedthestageofmaturityrequiredtohaveaccesstostockmarkets”.VenturecapitalUCIsinvestinthesehigherriskcompanieswiththeintentionofachievingahigherrateofreturn.

TheprincipalregulationsapplicabletoventurecapitalUCIsarestatedinChapterI.I.ofCircular91/75andareasfollows:

Management

(1) Managersandinvestmentadvisersmustbeabletodemonstratetheirspecificexperienceinventurecapital.

(2) If the remunerationof the investmentmanagementandadvisorybodies ishigher than thatusuallyapplicable toUCITS, theprospectusmust statewhether the additional remuneration is alsopayable on assets not invested inventurecapital.

Investment Limitations

(�) Investmentmustbediversifiedinordertospreadtheriskand,inparticular,nomorethan20%ofnetassetsmaybeinvestedinanyonecompany.

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Issue and Repurchase of Shares

(4) Whereinvestorshavetherighttopresenttheirsharesforrepurchase,theUCImayprovideforcertainrestrictionstothisright.Anysuchrestrictionsmustbestatedintheprospectus.

(5) The shares, which may be registered or bearer, must have a minimum value of €12,395 at the time of issue.

Financial Statements

(6) Theannualandsemi-annualreportsmustcontaininformationonthedevelopmentofthecompaniesinwhichtheUCIhasinvested,anddiscloseseparatelytheprofitorlossoninvestmentssold.

(7) SpecificinstanceswherepotentialconflictsofinterestcouldarisebetweentheinterestsofadirectoroftheinvestmentmanagementoradvisorybodiesandtheinterestsoftheUCImustbeindicatedinthefinancialstatements.

Prospectus

(8) TheprospectusmustcontainadetaileddescriptionofinvestmentriskinherenttothepolicyoftheUCIandofthetypeofconflictofinterestwhichcouldarisebetweentheinterestsofadirectoroftheinvestmentmanagementandadvisorybodiesandtheinterestsoftheUCI.

(9) TheprospectusmustcontainastatementindicatingthataninvestmentinsuchaUCIrepresentsanaboveaveragerisk,isonlysuitableforpersonswhocanaffordtotakesucharisk,andthataverageinvestorsareadvisedtoinvestonlyapartofthefundstheyhavesetasideforlong-terminvestment.

3.2.3. Futures Contracts and Options UCIs

TheprincipalregulationsapplicabletoUCIsinvestinginoneormoreofcommodityfutures,financialfuturesandoptionsarestatedinChapterI.II.ofCircular91/75andareasfollows:

Management

(1) Managersandinvestmentadvisersmustbeabletodemonstratetheirexpertiseinthisfield.

(2) If the remunerationof the investmentmanagementandadvisorybodies ishigher than thatusuallyapplicable toUCITS, theprospectusmust statewhether the additional remuneration is alsopayable on assets not invested infuturescontractsandoptions.

Investment Limitations

(�) Margindepositsrelatedtocommitmentsonpurchaseandsaleoffuturescontractsandcallandputoptionsmaynotexceed70%ofnetassets,thebalanceof�0%representingaliquidityreserve.

(4) Futurescontracts,includingthoseunderlyingoptions,mustbedealtinonanorganizedmarket.

(5) Contracts concerning commodities, other than commodity futures contracts, are not allowed.The acquisition ofpreciousmetalsforcash,negotiableonanorganizedmarket,ispermitted.

(6) Onlycallandputoptionsdealtinonanorganizedmarketarepermitted.Premiumspaidforsuchoptionsareincludedinthe70%limitin(�).

(7) Investmentsmustbesufficientlydiversifiedinordertospreadrisk.

(8) Anopenforwardpositionmaynotbeheldinanyonecontractforwhichthemarginrequirementrepresents5%ormoreofnetassets.Thisalsoappliestoopenpositionsresultingfromthesaleofoptions.

(9) Premiumspaidtoacquireoptionshavingidenticalcharacteristicsmaynotexceed5%ofnetassets.

(10) Openpositionsinfuturescontractsconcerningasinglecommodityorasinglecategoryoffinancialfuturesmustbelessthan20%ofnetassets.Thisalsoappliestoopenpositionsresultingfromthesaleofoptions.

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Borrowings

(11) Borrowingsofupto10%ofnetassetsarepermittedbutnotforinvestmentpurposes.

Shares

(12) The shares, which may be registered or bearer, must have a minimum value of €12,395 at the time of issue.

Financial Statements

(1�) Theannualandsemi-annualreportsmustdisclosetheprofitorlossforeachcategoryofclosedcontract.

(14) Commissionspaidtobrokersandfeespaidtotheinvestmentmanagementandadvisorybodiesmustbequantifiedinthefinancialstatements.

Prospectus

(15) Theprospectusmustcontainadetaileddescriptionofthetradingstrategywithregardtofuturescontractsandoptions,aswellastheinherentinvestmentriskandthehighriskofloss.

(16) TheprospectusmustincludeastatementindicatingthattheUCIisonlysuitableforpersonswhocanaffordtotakesucharisk.

3.2.4. Real Estate UCIs

TheCSSFdefinesrealestateforthepurposesofCircular91/75asbeing:

realestateregisteredinthenameoftheUCI

participationsinrealestatecompanies(aswellasloanstosuchcompanies)theexclusivepurposeandobjectsofwhichare theacquisition,developmentandsale togetherwith the lettingand tenantingof realestate,assuming that suchparticipationsareatleastasrealizableasthoserealestateinterestshelddirectlybytheUCI

variouslong-termrealestaterelatedinterestssuchasrightstogroundrents,long-termleasesandoptionrightsoverrealestateinvestments.

TheprincipalregulationsapplicabletorealestateUCIsarestatedinChapterI.III.ofCircular91/75andareasfollows:

Management

(1) Managersandinvestmentadvisersmusthaveexperienceinrealestateinvestment.

(2) If the remuneration of the investment and advisory bodies is higher than that usually applicable to UCITS, theprospectusmuststatewhethertheadditionalremunerationisalsopayableonassetsnotinvestedinrealestate.

Investment Limitations

(�) Investmentinpropertymustbesufficientlydiversifiedinordertospreadrisk,andinanycasenomorethan20%ofnetassetsmaybeinvestedinanyoneproperty.Propertywhichhasaneconomiclifedependentonanotherpropertyisnotconsideredasaseparateproperty.This20%ruledoesnotapplyduringastartupperiodnotexceedingfouryears.

Borrowings

(4) Totalborrowingsmaynotexceed50%ofthevalueofallproperties.

Valuations of Properties

(5) Oneormoreexperiencedindependentpropertyvaluersmustbeappointed.

(6) Attheyearend,allpropertiesownedbytheUCIoritsaffiliatedrealestatecompaniesmustbevaluedbythepropertyvaluers.

(7) Propertiesmaynotbeacquiredorsoldwithoutavaluationbythepropertyvaluers,althoughanewvaluationisnotrequiredifthesaleofapropertyoccurswithinsixmonthsofthelastvaluation.

(8) Thepurchaseorsalepricemaynotbeappreciablyhigheror lowerrespectively than thevaluation,exceptunderjustifiablecircumstanceswhichmustbeexplainedinthenextfinancialreport.

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Issue and Repurchase of Shares

(9) TheNAVmustbecalculatedattheyearend,andoneachdaywhentheUCI’ssharesareissuedorrepurchased.

(10) PropertyvaluationsattheyearendmaybeusedinthedeterminationofNAVduringthefollowingyear,unlessachangeofcircumstancesrenderssuchvaluationinappropriate.

(11) Whereinvestorshavetherighttopresenttheirsharesforrepurchase,theUCImayprovideforcertainrestrictionstothatright.Anysuchrestrictionsmustbestatedintheprospectus.

Financial Statements

(12) TheauditoroftheUCIanditsaffiliatedrealestatecompanies,whichare50%ormorefundedbytheUCI,mustbethesame.

(1�) TheaccountsoftheUCIanditsaffiliatedcompanies,whichshouldinprinciplebedrawnupatthesamedate,mustbeconsolidatedhalf-yearly,disclosingtheaccountingprinciplesappliedfortheconsolidation.

(14) Minorityunlistedshareholdingsinrealestatemustbeeitherpartiallyconsolidatedattheyearendorvaluedbasedontheprobablerealizablevalue.Thevalueofminoritylistedshareholdingsinrealestatecompaniesshouldbebasedonthestockexchangeormarketvalue.

(15) Theportfolioofpropertiesintheyearendandhalf-yearlyreportsmustshowforeachclassofpropertiesthecost,insuredvalueandvaluation.Propertiesmustbeshownatvaluationinthefinancialstatements.

Prospectus

(16) Theprospectusmustincludeadescriptionoftheinherentrisks.

(17) Itmustalsoprovidedetailsofthetypeofcommissions,expensesandchargestobebornebytheUCI,togetherwiththemethodofcalculationandaccountingtreatment.

3.3. Pension Fund Pooling Vehicles (PFPVs)

PFPVsarecollectiveinvestmentschemes(e.g.FCPs)createdbyinternationalgroupsinordertopooltheassetsofdifferentpensionfundsthattheymanageinvariousjurisdictionswheretheyhaveoperations.

Poolingassetsofmultiplepensionfunds,oftenindifferentjurisdictions,offersbenefitssuchasreducedoperationalfeesandcosts,efficientmanagementofassets,accesstoawiderrangeofpotentialinvestments,acentralisedgovernancestructureandconsistencybetweenpensionfunds.However,tooffertheseadvantagestoinvestors,thePFPVmustallowinvestorsthesamefiscaltreatmentasiftheyhadinvestedintheirhomejurisdiction.

PFPVscanbesetupasLuxembourgFCPs,whichare tax transparent.PFPVsarealsoexempt fromsubscription tax (SeeChapters10and11formoreinformationontaxationissuesrelatedtoLuxembourgfunds.)

Thus,Luxembourgoffersanattractiveregimethatallowsthepoolingofpensionfundinvestmentsinawaythatisbothtaxandcostefficient,intheinterestofthebeneficiaries.

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4.1. Authorization

Under the 2002 Law

AllUCIstobesetupinLuxembourgunderthe2002LawmustobtainpriorauthorizationfromtheCSSF.

ThedraftdocumentsandinformationtobesubmittedtotheCSSFfortheirapprovalaresetoutinArticles9�-96and109-112ofthe2002LawandChapterKofCircular91/75andareasfollows:

ArticlesofincorporationormanagementregulationsforFCPs

Fullprospectus

Simplifiedprospectus(applicabletoPartIUCITSsubjecttothe2002Law)

Otherinformationoradvertisingdocumentsintendedforinvestors

Agreements:

Custodian

Payingagency

Registrarandtransferagent

Domiciliationagent

Investmentmanagementoradvisory

Anyother

Nameofcustodian

Nameofindependentauditor

InformationtodemonstratethatcentraladministrationwillbeinLuxembourg(seeSection5.1.)

Informationonthepromoter(recentfinancialstatements)

Nameandcurriculumvitaeofdirectors andmanagers,whomustbeofgood repute andhave required experience(shareholdersofthemanagementcompanyofanFCParealsoconsideredasdirectors)

Marketingstrategy(method,countriesofmarketingandtargetedinvestors).

Theabove-mentioneddocumentsandinformationaregenerallycompiledandsubmittedtotheCSSFwiththeassistanceof a firm of lawyers/accountants and/or a bank in Luxembourg. For practical reasons, where possible, the documentsawyers/accountants and/or a bank in Luxembourg. For practical reasons, where possible, the documentssubmittedbytheapplyingUCIshouldbestandardcopiesofdocumentspreviouslyacceptedbytheCSSFforotherUCIs,adaptedwhereapplicable.

AuthorizedUCIs are entered by the CSSF on a list which is published in the Official Gazette (theareenteredbytheCSSFonalistwhichispublishedintheOfficialGazette(theMémorial).

Under the SIF Law

NopriorauthorizationfromtheCSSFisrequiredtosetupaSIF.However,constitutionaldocuments,choiceofcustodianandinformationregardingthedirectorsandofficersmustbesubmittedtotheCSSFwithinonemonthoftheformationofthefund.

TheSIF(oritsmanagementcompanyinthecaseofanFCP)isrequiredtodrawupanissuingdocumentwhichmustincludetheinformationnecessaryforinvestorstobeabletomakeaninformedjudgmentabouttheinvestmentproposedtothem7

(formoreinformation,seeSection�.2).TheissuingdocumentandanymodificationstheretomustbecommunicatedtotheCSSF.

UndertheSIFLaw,theCSSFdoesnotrequireapromoter,norwillitperformchecksonthestatusorfinancialpositionoftheportfoliomanager,thisbeinglefttotheduediligenceoftheinvestors.Thus,SIFsmaybecreatedbothbyandforinstitutionalandnon-institutionalinvestors(e.g.familyoffices,highnet-worthindividuals,etc).

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AnFCPmustbemanagedbyamanagementcompanyestablishedunderLuxembourglawandwhichcomplieswiththeprovisionsformanagementcompaniesoffundsunderthe2002Law(i.e.itmustbeamanagementcompanyofUCITSorofotherLuxembourgfunds).

DirectorsoftheSIFmustbeofgoodreputeandhavesufficientexperienceinrelationtothetypeofSIFbeingcreated.Tothisend,thenamesofthedirectors,andofeverypersonsucceedingtheminoffice,mustbecommunicatedtotheCSSF.

4.2. Investment Fund Service Providers

Aspartoftheformationproceduresofafund,severalserviceprovidersmustbeappointed.Theprincipaldutiesoftheseserviceprovidersareasfollows:

Administrator

Ingeneral,theadministratorisresponsibleforkeepingtheaccountingrecordsofthefund,calculatingtheNAVofthefund,assistinginpreparingtheannualandsemi-annualreportsofthefund,andactingasacontactwiththeCSSFandtheauditor.TheadministrationfunctionisfurtherdiscussedinChapter5.

Registrar and Transfer Agent

Theregistrarandtransferagentisresponsibleforkeepingtheprincipalregisterofshareholdersofthefund,andforarrangingfortheissue,transfer,allotment,conversion,redemptionand/orpurchaseofsharesofthefund.

Domiciliation Agent

ThedomiciliationagentprovidestheregisteredofficeoftheUCI.Itisresponsibleforprovidingofficeaccommodationandotherfacilitiestothefund,keepsallcorrespondencesenttothefund,andarrangespaymentofbillsonbehalfofthefund.

Custodian

ThecustodianisresponsibleforsupervisionoftheassetsoftheUCI,andforthedaytodayadministrationoftheassets(receipts, sales, dividends, etc.), basedon instructions received from the assetmanagers (unless theyconflictwith themanagementregulations).ThecustodianmustbeaLuxembourgcreditinstitution.Itmaydelegatetheactualholdingoftheassets.ThedutiesofthecustodianarethesubjectofChapter7.

Distributor

Thedistributoristheintermediaryappointedtodistributethesharesorunitsofthefund.

Paying Agent

ThepayingagentarrangesforpaymentofdistributionsmadebytheUCI.Apayingagentisrequiredineachcountrywherethefundisdistributed.Payingagent isa termuseddifferentlyin thecontextof theEUSavingsDirective(seeSection10.8.).

Investment Manager/Advisor

Theinvestmentmanager/advisormanagesandadvisesthefundwithrespecttotheinvestmentandreinvestmentofcash,securitiesandotherassetscomprisingtheassetsofthefund.

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Management Company

Amanagementcompanyisacompany,theregularbusinessofwhichisthemanagementofUCIs.NotallUCIsarerequiredtohaveamanagementcompany(seeSection1.�.).

4.3. Full Prospectus

ThecontentsofthefullprospectusaresetoutinScheduleAofAnnexItothe2002LawandinChapterLofCircular91/75.Theinformationrequiredmaybesummarizedasfollows:

a) Information Concerning the UCI and its Management Company

FCP ManagementcompanyofFCP

SICAV/SICAF

Name• X X XLegalform• X XRegisteredandheadoffice(ifdifferent).• X XDateofestablishment• X X XOtherFCPsmanagedbymanagementcompany• XPlace where constitutional documents or management regulations(FCP)maybeobtained

•X X

Briefdescriptionoftaxsystem• X XAccountinganddistributiondates• X XNameofindependentauditor• X XNamesandpositionsofmanagementandtheiroutsideactivities• X XCapital• X X(SICAF)Detailsoftypesandcharacteristicsofsharesorunits• X XStockexchangeonwhichsharesorunitsarelisted• X XProceduresandconditionsforissuingsharesorunits• X XProceduresandconditionsforrepurchasingsharesorunits• X XCircumstancesforsuspendingissuesandrepurchases• X XRulesfordeterminingandapplyingincome• X XInvestment objectives (capital growth or income policy, limitations,borrowings,instruments)

•X X

Rulesforvaluingassets• X XDeterminationofissueandrepurchaseprice(methodandfrequencyofcalculation,charges,placesandfrequencyofpublication)

•X X

Information on remuneration paid by UCI to management company,custodianorthirdparties

•X X

b) Information Concerning Custodian

Name,legalform,registeredandheadoffice(ifdifferent)

Mainactivity

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c) Information Concerning Investment Advisers

Nameofthefirmornameoftheadviser

Materialprovisionsofthecontract,excludingremuneration

Othersignificantactivities

d) Information Available to Investors

InformationconcerningarrangementsformakingpaymentstoshareholdersorunitholdersandrepurchasingsharesorunitsandmakingavailableinformationontheUCI:suchinformationistobegiveninLuxembourgandothercountrieswheretheprospectusistobecirculated.

e) Other Information (to be provided for all compartments in the case of multiple compartment UCIs)

HistoricalperformanceoftheUCI

Profileofthetypicalinvestor

f) Economic Information

Possibleexpensesorfees,otherthanthechargesmentionedina),distinguishingbetweenthosetobepaidbytheunit-holderandthosetobebornebytheUCI.

g) Date

Theprospectusmustbedatedandmayonlybeusedaslongastheinformationinitisaccurate.Theessentialelementsoftheprospectusmustbekeptup-to-date(Article112ofthe2002Law).

4.4. Simplified Prospectus

ThecontentsofthesimplifiedprospectusaresetoutinScheduleCofAnnexItothe2002LawandinCircular0�/122of19December200�whichprovidesformoredetailedinformationandalsoaninterpretationofcertaininformationcomprisedinScheduleC.

UCIswhichpublisha simplifiedprospectusmustpreviously transmit it to theCSSF (together,whereapplicable,with thesheetannexedtothesimplifiedprospectus)aswellasanyamendmentsthereto(and/ortothesheetannexedtothesimplifiedprospectus).Oncethesimplifiedprospectuseshaveobtainedthenihil obstatoftheCSSF,theyareprovidedwiththeCSSF’svisastampandareremittedtothepersonwhohasintroducedthefile.Tothateffect,theCSSFmustreceivefivesamplesofeachsimplifiedprospectusinitsfinalformandpresentation.Thevisastampmayinnocircumstancesbeusedforcommercialpurposes.

InaccordancewithArticle112ofthe2002Law,theessentialelementsofthesimplifiedprospectusmustbekeptup-to-date.

Adistinctionmustbemadebetween:

Thesporadicupdateswhichmustbemadeuponchangeofanyessentialelementsofthecompleteprospectusand/orthemanagementregulations/articles

Theperiodicalupdateswhichmustbemadeatleastonceayearandwhichconcerninparticularthefollowingelements–historicalperformance,totalexpenseratio(TER)andtheportfolioturnoverrate.

TheremainderofthisSectionsummarizesinformationrequiredinthesimplifiedprospectus.InthecaseofamultiplecompartmentUCITS,investmentinformationaswellaseconomicandcommercialinformationhastobegivenforeachcompartment.

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a) Brief Presentation of the UCI

WhentheUCIwascreatedandindicationoftheMemberStatewhereithasbeenregistered/incorporated

InthecaseoftheUCIhavingdifferentinvestmentcompartments,theindicationofthiscircumstance

Managementcompany(whereapplicable)

Expectedperiodofexistence(whereapplicable)

Custodian

Auditors

Financialgroup(e.g.abank)promotingtheUCI

b) Investment Information

ShortdefinitionoftheUCIobjectives

TheremustbeadescriptionoftheobjectivetheUCIseekstoachieve.Ifapplicable,itmustmentiontheguaranteesreceivedfromanythirdpartiesaswellasthelimitationstosuchguarantees.

UCIswhoseobjectiveistotrackanindexmustidentifytheindexandspecifythedegreeoftrackingsought.

Investmentpolicyandabriefassessmentoftheriskprofile

Theinvestmentpolicysectionistocomprise,ifrelevant,thefollowing:

Maincategoriesofeligiblefinancialassets

Informationonwhethertheinvestmentpolicyconcentratesoncertainmarkets(sectorial,geographicalorother)oroncertaintypesofassets(shares,bondsorother)

Iffinancialderivativeinstrumentsareusedtheinvestmentpolicysectionmuststatewhetherthistypeofinstrumentisusedforinvestmentpolicypurposesorforhedgingpurposesonly.

If an index is tracked, the investment policy section must state the strategy which is pursued to achieve thisan index is tracked, the investment policy section must state the strategy which is pursued to achieve thisobjective.

Thedescriptionof the riskprofile isqualitative. Inaddition to thegeneral risks, thissectionmustdescribe thespecificrisksincurredbyreasonofthespecificinvestmentpolicyorstrategiespursued.

Inallcases the simplified prospectus must contain the following provisions:sesthesimplifiedprospectusmustcontainthefollowingprovisions:

TheinvestmentsoftheUCIaresubjecttomarketfluctuationsandthereisariskfortheinvestortoeventuallyrecoveranamountlowerthanthatinvested

A reference to the full prospectus for a detailed description of the risks mentioned in the simplifiedprospectus.

Historicalperformance(whereapplicable)andawarningthatthisisnotanindicatoroffutureperformance

ThehistoricalperformanceoftheUCImustberepresentedinachartformandshowtheperformanceforthethreelastaccountingperiods.IftheUCIexistsforlessthanthreeyears,thechartmustpresenttheinformationforthefullpastyears.ars.

If theUCI ismanagedbyreference toan index(benchmark)or if thefeestructure includesaperformancefeedependingona reference index, the historic performance of the UCI must be compared to the historic performanceareferenceindex,thehistoricperformanceoftheUCImustbecomparedtothehistoricperformanceoftheindexbyreferencetowhichtheUCIismanagedoronthebasisofwhichtheperformancefeeiscalculated.

ProfileofthetypicalinvestortheUCIisdesignedfor

c) Economic Information

Taxregime

Entryandexitcommissions

Otherpossibleexpensesorfees(alsoTERandPortfolioTurnoverRate)

TheUCImustindicatethemanagementfeeand,whereapplicable,theperformancefeeaswellasotherpossibleexpensesand fees, distinguishing between those to be paid by the investor and those to be borne by the UCI.fees,distinguishingbetweenthosetobepaidbytheinvestorandthosetobebornebytheUCI.

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Inaddition,the UCI may calculate a TER. The TER is the ratio of the gross amount of expenses to the average neteUCImaycalculateaTER.TheTERistheratioofthegrossamountofexpensestotheaveragenetassetsoftheUCI.IfaUCIcalculatesaTER,thefollowingrulesmustbecompliedwith:

TheaveragenetassetsmustbecalculatedonthebasisofthenetassetsoftheUCIeachtimewhentheNAViscalculated.

TheTERmustbecalculatedatleastonceayearonanex-postbasis,inprinciplebyreferencetothefiscalyearoftheUCI.

TheTERincludesalltheexpensesleviedontheassetsoftheUCIsuchasmanagementcharges,performancefees, administration charges, custodian charges, distribution charges, professional charges of the auditor,professionalchargesofthelegaladvisers,registrationchargesandduties.TheTERdoesnotincludesubscriptionandredemptionfeespaiddirectlybytheinvestor,interestpayableorcostsincurredbythefundinthepurchaseorsaleofinvestments.

IfaUCIinvestsmorethan20%ofitsassetsinotherinvestmentfundswhichpublishaTERinaccordancewiththisCircular,asyntheticTERcorrespondingtosuchinvestmentmustbeindicated.

If the target funds do not publish aTER in accordance with this Circular, the impossibility to calculate asyntheticTERforsuchportionofinvestmentsmustbementioned.

ThesimplifiedprospectusmustindicateiftransactioncostsareorarenotincludedintheTER.

IftheUCIhasadoptedtheformofaUCIwithmultiplecompartmentsorissuesmultipleclassesofshares/units,theTERiscalculatedpercompartmentand,ifapplicable,perclassofshares/units.

Thesimplifiedprospectusmayindicatetheturnoverrateoftheportfolioonanannualbasis(portfolioturnoverrate).TheportfolioturnoverrateofaUCIor,ifapplicable,ofacompartmentmustbecalculatedasfollows:

Turnover=[(Total1–Total2)/M]*100

with:

Total1=totalofsecuritiestransactionsduringtherelevantperiod=X+YwhereX=purchasesofsecuritiesandY=saleofsecurities

Total2=totaloftransactionsinunits/sharesoftheUCIduringtherelevantperiod=S+TwhereS=subscriptionsofunits/sharesoftheUCIandT=redemptionsofunits/sharesoftheUCI

M=averagemonthlyassetsoftheUCI

TheinformationrelatingtotheTER,theportfolioturnoverrateandthehistoricperformancescanbereflectedinthesimplifiedprospectusoronasheetannexedtothesimplifiedprospectus.

d) Commercial Information

Procedurestobuytheunits

Procedurestoselltheunits

InthecaseofamultiplecompartmentUCI,indicationoftheprocedurestopassfromonecompartmentintoanotherandthechargesapplicable

Frequencyandproceduresrelatingtothedistributionofdividendsonunitsorshares(ifapplicable)

Frequencyandwhere/howpricesarepublishedormadeavailable

e) Additional Information

Statementthat,onrequest,thefullprospectus,theannualandhalf-yearlyreportsmaybeobtained

Competentauthority

Indication of a contact point (person/department, timing, etc.) where additional explanations may be obtained, ifneeded

Publicationdateoftheprospectus

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4.5. Stock Exchange Quotation

4.5.1. Listing Luxembourg Funds on LSE

Application for a quotation on the LSE may be made at the same time as the application for approval by the CSSF,submittingthesamedocumentsandinformation.Theadmissionofsecuritiestotheofficialstockexchangepricelistisdecidedonbythecommitteeforadmission.Toobtaintheadmissionofasecuritytotheofficialstockexchangelisting,anapplicationinwritingsignedbytheapplicants(oneatleastshallbeamemberoftheStockExchange)hastobesubmittedtotheLSE.

TheLSEregulationsalsooutlinetheconditionstobefulfilledforthelistingofsecuritiesredeemablein/exchangeableforshares/unitsofUCIsortheincome/redemptionofwhichis/arelinkedtounderlyingshares/unitsofUCIs.

4.5.2. Listing of Foreign Funds on LSE

European institutional investors such as pension funds are continuing to allocate a larger percentage of the assets toalternativeproductssuchashedgefunds.Inmanycases,theinstitutionalinvestorswillonlyallocateassetstohedgefundsandfundsofhedgefundswhichhavea listingonarecognizedorregulatedstockexchange.Asaresult,a listingonarecognizedexchangewilloftenbeakeytoolformarketinghedgefundsandfundsofhedgefunds.

InJune2004,theLSEissuednewregulationsallowingforforeignfunds(includinghedgefundsandfundsofhedgefunds)domiciledinjurisdictions,suchastheCaymanIslands,toobtainalistingontheLSE.

InorderforaforeignfundtoobtainalistingontheLSE,thefollowingconditionsmustbefulfilled:

Thefundpromotermustbeofgoodrepute,haveadequateprofessionalexperienceandappropriatefinancialstanding.

Theserviceprovidersofthefund(investmentmanager,managementcompany,custodian,administrativeagent,transferagent,etc.)musthaveadequateprofessionalexperience.

Theserviceprovidersmustbesubjecttoprudentialsupervisionintheirhomecountryorbepartofagroupsubjecttoprudentialsupervision.

Thefunctionsofinvestmentmanager,managementcompany,custodianandtransferagentmustbecarriedoutbyaseparateentity.

Thefundanditsserviceprovidersmustbeestablishedin jurisdictionswhichapply thestandards laiddownbytheFinancialActionTaskForce(FATF)onanti-moneylaunderingandshallnotbeestablishedinnon-cooperativecountriesandterritories.

Thefundmustpublishannualandsemi-annualfinancialstatements.Theannualfinancialstatementsmustbeauditedbyaqualifiedauditorapprovedinthefund’scountryoforiginandhaveadequateprofessionalexperience.

Financial and corporate information (i.e. NAVs, financial statements and prospectus) must be made available inLuxembourgviaCCLux.

The fundmust submita filecontainingcertain information to theLSE toobtaina listing.This file should include thefollowinginformation:

Aprospectus(writteninEnglish,FrenchorGerman)disclosingallthecriticalinformationrelatingtotheoperationsofthefundsuchasinvestmentpolicy,classesofsharesissuedandrelatedrightsofsuchshares,subscriptionandredemptionprocedures, tax status,valuation rules, accountingperiod,nameofauditor, information regardingdepositorybank/investmentadvisersandotherserviceproviders,historicalperformanceofthefund,profileoftypicalinvestor,detailsofexpensesandfees,etc.TheprospectusshouldalsomakeitclearthatthefundisnotavailableforpublicdistributioninLuxembourg.AprospectusapprovedbyanEUsupervisoryauthoritywouldnormallymeetall the requirementsoutlinedabove.

Namesandfunctionsofthepersons/entitiesresponsiblefortheprospectusalongwithacertificatefromsuchpersons/entitiesconfirmingtheirresponsibilityfortheprospectus,thattheinformationcontainedintheprospectusiscorrectandthatnoimportantfactshavebeenomitted.

Latestannualreport(andsemi-annualreportifmorerecentthantheannualreport).

TheLSEregulationsalsooutlinetheconditionstobefulfilledforthelistingofsecuritiesredeemablein/exchangeableforshares/unitsofUCIsortheincome/redemptionofwhichis/arelinkedtounderlyingshares/unitsofUCIs.

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and Supervision4

4.6. Supervision

TheCSSFsupervisesUCIsonacontinuousbasis.ChangestothedocumentsandinformationwhicharesubmittedonapplicationforauthorizationaretobesubmittedtotheCSSF.

TwocopiesoftheUCI’sannualandsemi-annualreports(annualreportsonlyinthecaseofSIFs)aretobeforwardedtotheCSSF,inadditiontomonthlyandannualfinancialinformation(seeChapter8).

TheCSSFalsohastheright,eitherdirectlyorthroughanintermediary,toexaminethebooksandrecordsofaUCI.

Ifthemanagementcompanyorcustodianisreplaced,ortheconstitutionaldocumentsareamended,thismustbeapprovedtotheCSSF.

WhenthedirectorsoftheUCIandthecustodianarereplaced,thenamesofthenewdirectorsmustbecommunicatedtotheCSSF.

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5.1. Central Administration

ThecentraladministrationofaUCI,setupundereitherthe2002LawortheSIFLaw,mustbeinLuxembourg,althoughitshouldbenotedthat theCSSFmaypermit,onacase-by-casebasis, theperformanceofcertain‘preparatory tasks’outsideLuxembourgsubjecttotheoverallresponsibilityoftheappointedLuxembourgcentraladministrator.TheprincipleobjectiveofthisrequirementistofacilitatethedutiesoftheCSSF,custodianbankandtheindependentauditor.

TheactivitiesofcentraladministrationwhicharetobecarriedoutinLuxembourgcompriseaccountingandadministrativefunctionsonlyandarespecifiedinChapterDofCircular91/75asfollows:

(i) TheaccountsmustbekeptandtheaccountingdocumentsmustbeavailableinLuxembourg.

(ii) IssuesandrepurchasesofsharesorunitsmustbecarriedoutinLuxembourg

(iii) TheregisterofshareholdersorunitholdersmustbekeptinLuxembourg.

(iv) Theprospectus,financialreportsandallotherdocumentsintendedforinvestorsmustbeestablishedincooperationwiththecentraladministrationinLuxembourg.

(v) CorrespondenceandthedispatchoffinancialreportsandotherdocumentsintendedfortheshareholdersmustbecarriedoutfromLuxembourgandinanycaseundertheresponsibilityofthecentraladministrationinLuxembourg.

(vi) ThecalculationoftheNAVmustbecarriedoutinLuxembourg.

TheCircularspecifiesthatthefollowingarepermittedabroad:

Appointmentofinvestmentadvisersestablished

Investmentdecisionsmaybemadeandexecuted.

NeithertheUCInorthemanagementcompanyofanFCPisrequiredtocarryoutthecentraladministration.ItmaybedelegatedtooneormoreLuxembourgcompaniesprovidedthattheUCIisinapositiontocoordinateandsupervisethevariousfunctions.TheUCImayappointaqualifiedagenttocarryoutorsupervisethetasks.Thesearegenerallybanks.InsuchcasestheagentwillthenbecometheofficialcontactfortheCSSF.

ChapterDofCircular91/75elaboratesoncertainaspectsoftherequirementsoutlinedini)tov),assummarizedinSections5.2.to5.6.

5.2. Accounting Records, Calculation of NAV and Supporting Documentation

Processing by Computer

ThecomputerunitwhichprocessestheaccountingrecordsandthecalculationoftheNAVmaybelocatedabroadsubjecttothefollowingconditions:

a) Central administration in Luxembourg must have the means to input and extract information, such access beingal administration in Luxembourg must have the means to input and extract information, such access beingimmediateandunrestricted.

b) Central administration must have knowledge of the operation of the processing unit and authorize any programmodifications.

c) Centraladministrationmusthavetheabilitytointervenedirectlyintheprocessingofinformationstoredintheprocessingunit.

d) InformationstoredintheprocessingunitmustbetransferredanddownloadedtoLuxembourgoneachvaluationofassetsandatleast weekly.eastweekly.

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e) Promoters must have the means to allow central administration to continue normal operations in the event of anemergency,suchasabreakdownincommunicationswiththeprocessingunit.

f) Whereotherpartiesusethecomputerunit,adequateprotectionmustexisttopreventaccesstotheUCIdata.

Conditionsa),b),c)andf)alsoapplywheretheprocessingunitissituatedinLuxembourg.

Investment advisers or other agents abroad may have immediate access to the network and may instigate accountingoperationswithinthescopeoftheirduties,providedthat:

Controlsexisttoensuretheyonlyhaveaccesstothedataapplicabletotheirduties

The UCI has established management control procedures to ensure that the operations initiated by the portfoliomanagerscomplywithitsregulations.

Procedures and Documents which must be in Luxembourg

AscentraladministrationinLuxembourghastheultimateresponsibilityfortheaccuracyofthefinancialinformation,italonemustcarryouttheprocessofallocatingprovisionsandaccrualsnecessarytofinalizetheNAVcalculation.

CentraladministrationmusthaveatitsdisposalinLuxembourgallaccountingandotherdocumentationoftheUCIrequiredfor:

Thepreparationofaccountsandportfoliovaluations

Thedrawingupofcertificatesoftitleandindebtedness

Theallotmentofsharesorunitsincirculation

ThegeneralprotectionoftheinterestsoftheUCI,includingallagreements.

Theabove requirements imply thatalldocuments relating to transactions initiated fromabroadshouldbe immediatelyforwardedtoLuxembourg.

5.3. Issue and Repurchase of Shares or Units

a) Procedures Carried out by Luxembourg and Foreign Intermediaries

TherequirementforissuesandrepurchasestotakeplaceinLuxembourgimpliesthatthefollowingtasksshouldbecarriedoutbycentraladministration:

a) Processingofissuesandrepurchases

b) Determinationofprices

c) Preparationofcontractnotes

d) Preparationofshareorunitcertificates

e) Dispatchofcontractnotesandshareorunitcertificates.

TheaboverequirementsdonotprohibittheappointmentofLuxembourgorforeignintermediariesasauthorizedagentsfortheplacingandrepurchaseofsharesorunits.

Luxembourgorforeignintermediariesmayparticipateinissueandrepurchaseoperationsas:

Distributors

Nominees

Marketmakers

providedthatthisinnowayrestrictstheabilityofinvestorstodealdirectlywiththeUCI,andthatthisisclearlystatedintheprospectus.

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b) Distributors

Distributors are intermediaries who are part of the distribution system set up by the promoters to perform one of thefollowing:

Activelymarketthesharesorunits

ReceivesubscriptionandrepurchaseordersasappointedagentsoftheUCI.

Thefollowingconditionsareapplicabletodistributors:

a) For thepurposesof processing the subscription and redemptionorders, distributorsmust immediately forward thenecessarydatatocentraladministration(see,however,d)).

b) Forordersconcerningregisteredsharesorunits,distributorswillprovidecentraladministrationwiththeregistrationdatanecessarytoaccomplishtherelatedtasksonanindividualbasis.

c) Therequirementofb)doesnotapplyinthecaseofordersconcerningbearersharesorunits.Insuchcases,distributorsact as subscribers in relation to central administration in Luxembourg. They may therefore aggregate individualsubscriptionorrepurchaseordersandtransmitthemintheformofacombinedordertothecentraladministrationinLuxembourg.

d) Itisnotnecessaryfordistributorstoforwardtocentraladministrationthedocumentationrelatingtosubscriptionandrepurchaseordersfrominvestors.However,theadministrationmustbeallowedaccesstosuchdocumentationincaseofneed.

e) Paymentsandreceiptsinrespectofsubscriptionandrepurchaseordersmaybeaggregatedbydistributorsinordertodealwithcentraladministrationonanetbasis.

f) Stocksofunissuedshareorunitcertificatesmaybeheldbydistributors.

c) Nominees

NomineesactasintermediariesbetweeninvestorsandtheUCIoftheirchoice.

Theuseofnomineesisonlyauthorizedifthefollowingconditionsaremet:

a) TherelationshipbetweentheUCI,thenominee,centraladministrationandtheinvestorsisdeterminedbycontract

b) Thepromotersensurethatthenomineecanadequatelyguaranteetoexecuteproperlyitsobligationstowardsinvestors

c) Theroleofthenomineeisadequatelydescribedintheprospectus

d) InvestorshavetherighttodirectlyinvestintheUCIwithoutusinganomineeandthisrightisexpresslystatedintheprospectus

e) Agreementsbetweenthenomineeandtheinvestorsincludeaterminationclausegivingtheinvestortherighttoclaimtitletothesharesorunitssubscribedthroughthenominee.

Theconditionsofd)ande)arenotapplicablewheretheuseofanomineeiseithercompulsoryorindispensable.

d) Market Makers

MarketmakersareintermediariesparticipatingontheirownaccountandattheirownriskinsubscriptionandrepurchasetransactionsonUCIsharesorunits.

Theuseofmarketmakersisonlyauthorizedifthefollowingconditionsaremet:

a) TherelationshipbetweentheUCI,centraladministrationandthemarketmakersisdeterminedbycontract.

b) Theroleofthemarketmakerisadequatelydescribedintheprospectus.

c) Marketmakersmaynotactascounterpartstosubscriptionandrepurchasetransactionswithoutspecificapprovaloftheinvestors.

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d) MarketmakersmaynotpricesubscriptionandrepurchaseordersaddressedtothemonlessfavorabletermsthanwouldbeappliedbytheUCIdirectly.

e) Market makers must regularly notify central administration of orders executed by them which relate to registeredsharesorunits inorder that theregisterofshareholdersorunitholders isupdatedandthatregisteredcertificatesorconfirmationsofinvestmentmaybesentoutfromLuxembourg.

e) Prevention of Money Laundering

TheLawof7July1989introducedtheconceptoflaunderingproceedsofanillegalactivity(drugtrafficking)asacriminaloffence.TheLawof11August1998 (supplementedbyCirculars98/15�and00/21)extended thecategoriesof illegalactivitiestoalsoincludecrimesoroffencescommittedwithinthecontextoforinconjunctionwithacriminalassociationor a criminal organization, abductions of minors, crimes of procuring, crimes of corruption, infringements of the lawgoverningarmsandmunitionsandbriberyofpublicofficials.

TheLaw of 5April 199� on theFinancialSector as amended (199� Law), defined rules of professional conduct thatmustbeobservedconcerning,inter alia,moneylaundering.CSSFCircular94/112Measures to combat money laundering and prevention of the use of the financial sector for the purpose of money laundering provided guidance to financialprofessionalsonhowtoobservethe199�Law.

TheSecondAnti-MoneyLaunderingDirective,EUDirective2001/97/EC,passedinDecember2001,ledtoLuxembourglawof12November2004whichprovideslegalprovisionsinthefightagainstmoneylaunderingandterroristfinancing.

ThesevariouslegaldevelopmentsledtotheCSSFpublishingCircular05/211on1�October2005onthepreventionoftheuseofthefinancialsystemforthepurposeofmoneylaunderingandthefinancingofterrorism.ThenewCircularprovidesacombinedtextbringingtogetherallprofessionalobligationsinrelationtothefightagainstmoneylaunderingandterroristfinancing,anddetailshowsuchobligationsshouldbeexecuted.

Thefollowingisabriefsummaryoftheupdatedprovisions:

Theremustbeapersondesignatedspecificallyinchargeofanti-moneylaunderingandthepreventionoffinancingforterrorism.ThiswillnormallybetheComplianceOfficer.

This person must ensure implementation of internal policies and procedures relating to customer acceptance,identificationandmonitoring,riskmanagement.TheCircularsetsouthis/herresponsibilities.

Inordertocombatmoneylaunderingandterroristfinancing,theCircularstatesthatprofessionalsofthefinancialsectorshouldadoptarisk-basedapproachinrelationtocustomeridentificationandtransactionmonitoring.

Funds and management companies have to meet the professional obligations where they sell units directly to thepublic.

Wherebranchesandsubsidiariesoffinancialinstitutionsarenotalreadycoveredbyequivalentrequirementsintheirplaceofestablishment,theymustmeettherequirementsoftheLuxembourgregulationasaminimum.TherequirementsoftheEU,EuropeanEconomicArea(EEA)andtheFinancialActionTaskForceonMoneyLaundering(FATF)membercountriesareautomaticallyconsideredequivalent.

Know Your Customer (KYC) protocols have to be performed on occasional clients for all transactions over €15,000, or wherethereissuspicionofmoneylaunderingorfinancingofterrorism.

IdentificationisnotrequiredwheretheclientisaLuxembourgfinancialinstitutionoraforeignfinancialinstitutionsubjecttoequivalentidentificationobligations.

Potentiallysuspicioustransactionsmustbeexaminedindetail.CriteriaforidentifyingsuchtransactionsaregivenintheCircular.Consideringthenumberofclientsandriskytransactions,itisrecommendedtouseITsystemstodetectsuspicioustransactions.

Theobligationtoco-operatewithauthoritieshasbeenclarified.

NewprofessionalPractices and Recommendations aimed at reducing the risk of money laundering and terrorist financing in the Luxembourg Fund Industry were published in December 2006. They were endorsed by theAssociation of theLuxembourgFundIndustry(ALFI),theLuxembourgBankers’Association(ABBL)andtheAssociationofLuxembourgComplianceOfficers(ALCO).

ThepracticesandrecommendationsaretobeconsideredasguidanceonbestpracticefortheLuxembourgfundindustryinthelightoftherequirementsoftheLawof12November2004oncombatingmoneylaunderingandthefinancingofterrorismaswell as the subsequentCSSFcircular,Circular 05/211.They suggest a risk-based approach in relation tocustomeridentificationandtransactionmonitoring,inlinewithinternationalstandards.Theyalsoprovideamethodology

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for assessing the equivalence of legal and regulatory Know-Your-Customer requirements of foreign jurisdictions bycomparingthemtoFinancialActionTaskForce(FATF)standards.

InordertoupdateEuropeanlegislation,bringitinlinewithinternationalrecommendations,andtoensuretheircoherentapplicationinMemberStates,theEUadoptedtheThirdAnti-MoneyLaunderingDirective,whichmustbetransposedintonationallegislationby15December2007.Formoreinformation,seeChapter15.

5.4. Register of Shareholders

Theregisterofshareholdersorunitholdersmustbepermanentlyavailable inLuxembourgandcentraladministrationmustperformtheregistrations,alterationsordeletionsinLuxembourg.

Wherecentraladministrationusesaremote-accesscomputerunittocarryoutthisfunction,itmustapplythesamesecurityandprotectionmeasuresdescribedinSection5.2.

Distributorswhoareconnectedtotheremote-accesscomputerunitmayuseittotransmitinformationrelatingtoissueandrepurchaseorderstocentraladministrationinordertoinitiatethenecessaryoperations.

5.5. Prospectus, Financial Reports and Other Documents Intended for Investors

Therequirementforprospectuses,financialreportsandotherdocumentsintendedforinvestorstobedrawnupincooperationwithcentraladministrationonlyrelatestotheintellectualasopposedtothephysicaleffort.Thisrequirementdoesnotexcludethelimiteduseofexpertsabroad.

Asthisrequirementdoesnotextendtotechnicalorphysicalaspects,centraladministrationmayuseprintersorotherprovidersofservicesestablishedabroadinconnectionwiththephysicalproductionofthedocuments.

5.6. Correspondence and Dispatch of Financial Reports and Other Documents

TherequirementthatcorrespondenceandthedispatchoffinancialreportsandotherdocumentsintendedforshareholdersbecarriedoutfromLuxembourgisaimedatsafeguardingconfidentialityofdatarelatingtoinvestors.Thisrequirementappliestodocumentsprintedabroad.Asanexception,dispatchestotherelevantinvestorsmaybecarriedoutfromabroad(e.g.printers)providedthatitiscarriedoutunderthesupervisionofcentraladministrationinLuxembourgwithadequatesecuritymeasures.

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6. Issue and Repurchase of Shares and Payment of Dividends

6.1. Minimum Capital

All UCIs require a minimum capital/net assets of €1,250,000 which must be achieved within six months of authorization in thecaseof2002LawfundsandtwelvemonthsinthecaseofSIFs.InthecaseofamultiplecompartmentUCI,thiscapitalrequirementappliestotheUCIasawhole,nottotheindividualcompartments.

In the case of an FCP, if the net assets fall below two-thirds of the legal minimum of €1,250,000, the management company mustimmediatelyinformtheCSSFwhichmaycompeltheFCPtobeputintoliquidation.

InthecaseofaUCIsetupasaninvestmentcompany(SICAVsandSICAFs),ifthecapitalfallsbelowtwo-thirdsoftheminimumcapital of €1,250,000, the directors must submit the question of dissolution to a general meeting. No quorum is required; the question is decided by a simple majority. If the capital falls below one-fourth of the minimum capital of €1,250,000, the dissolutionmayberesolvedbyshareholdersholdingone-quarterofthesharesatthemeeting.Themeetingmustbeconvenedwithin40daysfromthedateofascertainmentthatthenetassetshavefallenbelowtwo-thirdsorone-fourthoftheminimumcapital,asthecasemaybe.

ThesharesorunitsofaSICAV/SICAFmustbefullysubscribed.Thoseofa2002LawSICAVmustbefullypaidup;however,inthecaseofaSIF,only5%oftheamountofthesubscriptionpershareorunitmustbepaidupincashorbymeansofacontributionotherthancash.ThisisalsoapplicabletoSIFLawSICAFs.Thiswillfacilitatestructuressuchasprivateequityfundstomakecapitalcallsoveraperiodoftime.

6.2. Issues and Repurchases

Therolesoftheadministration,distributors,nomineesandmarketmakersintheissueandrepurchaseofsharesorunitsarediscussedinSection5.�.

6.2.1. Issues (Subscriptions)

Sharesorunitsarerepresentedbycertificatesinregisteredorbearerformorbyaconfirmationofregistration.Fractionsofsharesorunitsarepermitted.Sharesorunitsaretobeissuedinaccordancewiththeconditionslaiddowninthearticlesofincorporation(SICAV/SICAF)ormanagementregulations(FCP).Theymaybedenominatedinanycurrency.

6.2.2. Repurchases (Redemptions)

Repurchasesofsharesorunitsaretotakeplaceinaccordancewiththeconditionslaiddowninthearticlesofincorporation(SICAV/SICAF)ormanagementregulations(FCP).

UCITS are required to repurchase their shares or units at the request of investors. However, a UCITS may, if it canbe justified,provide in itsconstitutionaldocuments thatmanagement isable, inspecificcircumstances(e.g. temporaryliquidityshortage)orwhenrequestsinasingledealingdayexceedacertainsetlevelinrelationtothenumberofsharesincirculation,toarrangeforadelayinsettlementofrepurchaserequestsforaspecifictimeorforaproportionalreductionofallrepurchaserequestssothatthesetlevelisnotexceeded.

Repurchases may be suspended under the conditions specified in the articles of incorporation (SICAV/SICAF) ormanagementregulations(FCP)or,incertaincircumstances,attherequestoftheCSSF.

6.2.3. Issue and Repurchase Price

For2002Lawfunds,theissueandrepurchasepriceistheNAVpershareorunit,arrivedatbydividingtheNAVbythenumberof sharesorunitsoutstanding.Suchpricemaybe increased, in thecaseof issues and reduced, in thecaseofrepurchases,byaspecifiedpercentagetocovercommissionsandexpenses.

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The2002LawprescribesthefollowinggeneralbasesforcalculatingtheNAV:

Quotedsecuritiesarevaluedatthelastknownstockexchangequotation.

Unquoted securities (or quoted securities for which the last known quotation is not considered representative) arevaluedwithprudenceattheestimatedprobablerealizationprice.

SeealsoSection6.�.whichdealswithProtection Against Late Trading and Market Timing Practices.Theseprotectivemeasuresmayincludethevaluationofsecuritiesat“fairvalue”.

Thefrequencyofthedeterminationoftheissueandrepurchasepriceisspecifiedinthearticlesofincorporation(SICAV/SICAF)ormanagementregulations(FCP).Thepricemustbedeterminedandmadepubliceachtimethesharesareissuedorrepurchasedand,inprinciple,atleasttwiceamonthforaUCITSandatleastmonthlyforotherUCIs.

Under the SIF Law, there is significant flexibility regarding issue and redemption of units or shares. The issue andredemptionofunitsorsharesmustbecarriedoutinaccordancewiththeruleslaiddowninthemanagementregulations(FCP)orarticlesofincorporation(SICAV).Theserulescouldprovide,forexample,forunitsorsharestobetransferredatapriceotherthantheNAV.

6.3. Protection Against Late Trading and Market Timing practices

Introduction

On17June2004,theCSSFissuedCircular04/146ontheProtection of UCIs and their investors against Late Trading and Market Timing practices.TheCircular:

clarifiestheprotectivemeasurestobeadoptedbyUCIsandcertainoftheirserviceproviders

fixesmoregeneralrulesofconducttobecompliedwithbyallprofessionalssubjecttothesupervisionoftheCSSF

extends the roleof theauditorof theUCI,asdescribed inCSSFCircular02/81(seeSection8.1.5.), regarding theverificationoftheproceduresandcontrolsestablishedbytheUCItoprotectitagainstlatetradingandmarkettiming practices.

Following theCircular,ALFI issued its report entitledFair Value Pricing & Arbitrage Protection.The report aims toprovide a reference document collating the reports and recommendations that emerged following accusations of LateTradingandMarketTimingintheinternationalmutualfundindustry.ThisincludestheGuidelinesissuedbyALFItoitsmembersandthecompleteReportoftheALFIWorkingGrouponFairValuePricingandArbitrageProtection.

Definitions

Late Trading

Latetrading istheacceptanceofasubscription,conversionorredemptionorderafterthetimelimitfixedforacceptingorders(cut-offtime)ontherelevantdayandtheexecutionofsuchorderatthepricebasedontheNAVapplicabletosuchsameday.

Throughlatetrading, aninvestormaytakeadvantageofknowledgeofeventsorinformationpublishedafterthecut-offtimewhicharenotyetreflectedinthepricewhichwillbeappliedtosuchinvestor.Thisinvestoristhereforeprivilegedcomparedtotheotherinvestorswhohavecompliedwiththeofficialcut-offtime.Theadvantageofthispracticetotheinvestorisincreasedevenmoreifheisabletocombinelatetradingwithmarkettiming.

Thelatetrading practiceisnotacceptableasitviolatestheprovisionsoftheprospectusesoftheUCIswhichprovidethatanorderreceivedafterthecut-offtimeisdealtwithatapricebasedonthenextapplicableNAV.

Theacceptanceofanorderisnottobeconsideredasalatetrading transaction,wheretheintermediaryinchargeofthemarketingoftheUCItransmitstothetransferagentoftheUCIaftertheofficialcut-offtimetostillbedealtwithattheNAVapplicableonsuchday,ifsuchorderhaseffectivelybeenissuedbytheinvestorbeforethecut-offtime.Tolimittheriskofabuse,thetransferagentoftheUCImustensurethatsuchorderistransmittedtohimwithinareasonabletimeframe.

Theacceptanceofanorderdealtwithorcorrectedafterthecut-offtimebyapplyingtheNAVapplicableonsuchdayisalsonottobeconsideredasalatetrading transaction,ifsuchorderhaseffectivelybeenissuedbytheinvestorbeforethecut-offtime.

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Market Timing

Markettiming isanarbitragemethodthroughwhichaninvestorsystematicallysubscribesandredeemsorconvertsunitsorsharesof thesameUCIwithinashort timeperiod,by takingadvantageof timedifferencesand/or imperfectionsordeficienciesinthemethodofdeterminationoftheNAVoftheUCI.

Opportunitiesariseforthemarkettimer eitheriftheNAVoftheUCIiscalculatedonthebasisofmarketpriceswhicharenolongeruptodate(“staleprices”)oriftheUCIisalreadycalculatingtheNAVwhenitisstillpossibletoissueorders.

Themarkettiming practiceisnotacceptableasitmayaffecttheperformanceoftheUCIthroughanincreaseofthecostsand/orentailadilutionoftheprofit.

Prevention of Late Trading and Market Timing Practices

Aslatetradingandmarkettiming practicesarelikelytoaffecttheperformanceoftheUCIandarelikelytoharminvestors,thepreventivemeasuresrecommendedhereafterhavetobeappliedwithgreatcare.

a) Protective Measures to be Adopted by the UCI and by Certain of its Service Providers

Theinvestormust,inprinciple,subscribe,redeemorconverttheunitsorsharesofaUCIatanunknownNAV.Thisimplies that thecut-off timemustbe fixed inamanner toprecedeor tobesimultaneous to themomentwhen theNAV,onwhichtheapplicablepriceisbased(“forwardpricing”),iscalculated.Anon-precisecut-offtimesuchas,forexample,“untilthecloseofbusiness”istobeavoided.Theprospectusmustspecificallymentionthatsubscriptions,redemptionsandconversionsaredealtwithatanunknownNAVandmustindicatethecut-offtime.

Thetransferagentof theUCIshallensure thatsubscription,redemptionandconversionordersarereceivedbeforethecut-offtimeassetforthintheUCI’sprospectusinordertoprocessthematthepricebasedontheNAVapplicableonthatday.Inrespectofordersreceivedaftersuchcut-offtime,thetransferagentappliesthepricebasedonthenextapplicableNAV.Thetransferagentshallensurethathereceiveswithinareasonabletimeperiodtheorderswhichhaveeffectivelybeenissuedbyinvestorsbeforethecut-offtimebutwhichhavebeenforwardedtothetransferagentbyintermediariesinchargeofthemarketingoftheUCIaftersuchtimelimitonly.

Inordertobeabletoensurethecompliancewiththecut-offtime,thetransferagentoftheUCImustadoptappropriateproceduresandundertaketoperformthenecessarycontrols.ThetransferagentundertakeseithertoprovidetheUCIonanannualbasiswithaconfirmationfromitsauditoronitscompliancewiththecut-offtimeortoauthorizetheauditoroftheUCItoperformitsowncontrolsonthecomplianceofthecut-offtime.

IfintermediariesinchargeofthemarketingoftheUCIhavebeenappointedbytheUCItoensurethecollectionofordersandthecontrolofthecut-offtimewithregardtotheacceptanceoftheorders,theUCIshallensurethatitobtainsfromeachintermediaryconcernedacontractualundertakingpursuanttowhichtheintermediariesundertaketowardstheUCItotransmittothetransferagentoftheUCI,fortheprocessingattheNAVapplicableonsuchday,onlysuchorderswhichithasreceivedbeforesuchcut-offtime.

Thecut-offtime,thetimeatwhichthepricesofsecuritiesaretakenintoaccountforthecalculationoftheNAVandthetimeatwhichtheNAViscalculatedmustbecombinedinamannersoastominimizeanyarbitragepossibilitiesarisingfromtimedifferencesand/orimperfections/deficienciesinthemethodofdeterminationoftheNAVoftheUCI.

UCIswhich,dueto theirstructure,areexposedtomarket timingpracticesmustput inplaceadequatemeasuresofprotectionand/orcontroltopreventandavoidsuchpractices.Theintroductionofappropriatesubscription,redemptionandconversioncharges,anincreasedmonitoringofdealingtransactionsandthevaluationoftheportfoliosecuritiesat“fairvalue”mayconstitutepossiblesolutionsforsuchUCIs.

Theboardofdirectorsshouldanalyzesuchsolutionswithcareandisresponsibleforimplementingthemormakingcertainthattheyareimplemented.

TheUCIshallensurenottopermittransactionswhichitknowstobe,orithasreasonstobelievetobe,relatedtomarkettimingandusesitsbestavailablemeanstoavoidsuchpractices.

If there exist formal contractual relationships between the UCI and intermediaries in charge of its marketing, theUCI shall ensure it obtains a contractualundertaking fromeach intermediarynot topermit transactionswhich theintermediaryknowstobe,orhasreasonstobelievetobe,relatedtomarkettiming.

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Theprospectusof theUCIs concernedmust includea statement indicating that theUCIdoesnotpermitpracticesrelated to market timing and that the UCI reserves the right to reject subscription and conversion orders from aninvestorwhotheUCIsuspectsofusingsuchpracticesandtotake,ifappropriate,thenecessarymeasurestoprotecttheotherinvestorsoftheUCI.

Particularattentionhas tobepaid to subscription,conversionor redemptionorders fromemployeesof the serviceproviderstotheUCIorfromanypersonwhoholdsorislikelytoholdprivilegedinformation(e.g.knowledgeontheexactcompositionoftheportfoliooftheUCI,etc).Accordingly,adequatemeasureshavetobetakenbytheserviceprovidersoftheUCIstoavoidtheriskthatanysuchpersontakeadvantageofhisprivilegedsituationeitherdirectlyorthroughanotherperson.

b) Rules of Conduct to be Followed by all Professionals Subject to the Supervision of the CSSF

TheCSSFprohibitsanyexpressortacitagreementwhichpermitscertaininvestorstoundertakelatetradingormarkettimingpractices.

TheCSSFrequiresthatanyprofessionalsubjecttoitssupervisionrefrainsfromusinglatetradingormarkettimingpracticeswheninvestinginaUCIorfromprocessingasubscriptionorconversionorderofunitsorsharesofaUCIwhichheknowstobe,orhehasreasonstobelievetobe,relatedtolatetradingormarkettiming.

TheCSSFrequiresthatanyprofessionalsubjecttoitssupervisionthatdetectsorisawareofacaseoflatetradingormarkettiming,informsassoonaspossible,theCSSFbyprovidingtothelatterthenecessaryinformationtoenableittomakeajudgmentonthesituation.

Compensation and Sanctions

Anypersonwhoisguiltyofknowinglyundertakingorsupportinglatetradingormarkettiming practicesasdefinedbythisCircularexposeshimselftosanctionsor,inaddition,totheobligationofrepairingthedamagecausedtotheUCI.

Role of Auditor

Circular 04/146 included provisions on the role of the auditor regarding late trading and market timing. For furtherinformation,seeSection8.1.5.

6.4. Payment of Dividends

Thereareno restrictionson theamountwhichmaybedistributedbyFCPsorSICAVsexcept that thenetassetsafterdistribution must exceed the minimum €1,250,000.

SICAVsandFCPsarenotsubject to theprocedures requiredforpublic limitedcompanies topayan interimdividend.SICAVsandFCPsarealsoexemptfromtherequirementtocreatealegalreserve.

ASICAF,however, issubject tothenormalauthorizationproceduresforpayinginterimdividendsandisalsorequiredtocreatea legalreserve.Theinterimdividendauthorizationprocedures includespecificauthorizationin thearticlesofassociationandthepreparationofinterimfinancialstatements,underthecontroloftheauditor.SICAFsarealsosubjecttothelegalreserverequirement,whichis5%ofnetprofituntiltheaccumulatedreserveequals10%ofsubscribedcapital.

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7Custodian

7. Custodian

7.1. UCIs under the 2002 Law

7.1.1. Qualifications

General

Luxembourg UCIs must appoint a credit institution as custodian (depositary).This appointment must be approved bytheCSSF.Undercertainstringentconditions,aUCImaybeexempt,butinpracticethiswillberare.Ifthecustodianisreplaced,thismustbecommunicatedtotheCSSF.

Custodian of a UCITS

ThecustodianbankofaUCITSmustberegisteredinLuxembourgorbeestablishedinLuxembourgifitsregisteredofficeisinanotherEUcountry.ALuxembourgbranchofanon-EUbankmaynotthereforeactascustodianofaUCITS.

Custodian of other UCIs

Thecustodian bank of other UCIs must be established in Luxembourg. A Luxembourg branch of any foreign bank mayianbankofotherUCIsmustbeestablishedinLuxembourg.ALuxembourgbranchofanyforeignbankmayconsequentlyact as custodian.tascustodian.

7.1.2. Responsibilities

General

Theresponsibilitiesofthecustodianare:

CustodyoftheUCI’sassets(maydelegatethistasktoacorrespondentbutitretainsoverallresponsibilitytotheUCI).Custodyinthiscontextissupervisionratherthansafekeeping

Ensuring that the sale, issue, repurchase and cancellation of shares or units are effected in accordance with theregulations

Ensuringthatsettlementsaremadeonatimelybasis

EnsuringthattheUCI’sincomeisappliedinaccordancewiththeregulations.

Additional Responsibility with Regard to an FCP

Carrying out all operations concerning the day-to-day administration of the assets of an FCP (responsible for thecollectionofdividends,interestandproceedsofmaturedsecurities,theexerciseofoptions,etc.)

Carryingouttheinstructionsofthemanagementcompany,unlesstheyconflictwiththeregulations.

Additional Responsibility with Regard to a UCITS Formed as an FCP

EnsuringthattheNAViscalculatedinaccordancewiththeregulations.

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ASIFmustappointaLuxembourgcustodian(i.e. itmusthave its registeredoffice inLuxembourgorbe theLuxembourgbranchofabankwithitsregisteredofficeinanotherMemberStateoftheEU).

Theconceptofcustodian,undertheSIFLaw,maybeviewedastheroleofasupervisor-thelocalLuxembourgcustodianshouldknowatalltimeswheretheassetsareandhowtheyareinvested.ItdoesnotmeanthatthelocalLuxembourgcustodianmusthavephysicalpossessionoftheassets.Thisfacilitatestheappointmentofsub-custodiansandprimebrokers.

IncontrastwiththeprecursortotheSIFLaw,the1991Law,thecustodianisnotrequiredtocontroltheregularityofcertainoperations,suchasensuringthatthesale,issue,redemptionandcancellationofunits/shareseffectedarecarriedoutinaccordancewiththelawandthemanagementregulationsorthearticlesofincorporationandensuringthattheincomeoftheSIFisappliedinaccordancewiththemanagementregulationsorthearticles.

Ifthecustodianisreplaced,thismustbecommunicatedtotheCSSF.

Inthecaseofhedgefunds,theSIFLawdoesnotimposeanyrestrictionsontheappointmentofaprimebroker.Thecustodian’sresponsibilityinrelationtotheappointmentofaprimebrokerwouldincludeperformanceofcertainduediligenceprocedurestoensurehighreputation,appropriateexperienceandsufficientfinancialresources.

Thecustodianwouldalsohavetoensurethattherewasappropriatereportinginplacetoenableittomonitorhowandwhereallassetsdepositedareheld.ACSSFCircularisexpectedontheroleofthecustodianofSIFs.

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8. Reporting and Audit Requirements

8.1. Under the 2002 Law

8.1.1. Annual Report

Anauditedannualreport(oftennowreferredtoastheshortformreport)istobepublished(andsenttotheCSSF)withinfourmonthsofthefinancialyearend.Theannualreportmustalsobeavailable15dayspriortotheannualgeneralmeetingofshareholders.Theannual reportmust includeareporton theUCI’sactivities,astatementofassetsand liabilities,adetailedincomeandexpenditureaccountandtheinformationspecifiedinScheduleBofAnnexItothe2002Lawwhichissetoutbelow.

I. Statementofassetsandliabilities:

Transferablesecuritiesandmoneymarketinstruments

Bankbalances

Otherassets

Totalassets

Liabilities

NAV

II. Numberofsharesorunitsincirculation

III.NAVpershareorunit

IV. Portfolio,distinguishingbetween:

a) Transferablesecuritiesandmoneymarketinstrumentsadmittedtoofficialexchangelisting

b) Transferablesecuritiesandmoneymarketinstrumentsdealtinonanotherregulatedmarket

c) RecentlyissuedtransferablesecuritiesandmoneymarketinstrumentsofthetypereferredtoinArticle41(1)d)

d) othertransferablesecuritiesofthetypereferredtoinArticle41(2)a)

andanalyzedinaccordancewiththemostappropriatecriteriainthelightoftheinvestmentpolicyoftheUCI(e.g.inaccordancewitheconomic,geographicalorcurrencycriteria)asapercentageofnetassets;foreachinvestment,theproportionitrepresentsofthetotalnetassetsoftheUCIshouldbestated.

Statement of changes in the composition of the portfolio during the reference period.The CSSF may permit thisstatementtobeomittedfromtheannualreport,providedthatitismadeavailablefreeofchargetoshareholders,andthatthisisclearlystatedintheannualreport.

V. StatementofthedevelopmentsconcerningtheassetsoftheUCIduringthereferenceperiodincludingthefollowing:

Incomefrominvestments

Otherincome

Managementcharges

Custodian’scharges

Otherchargesandtaxes

Netincome

Distributionsandincomereinvested

Changesincapitalaccount

Appreciationordepreciationofinvestments

AnyotherchangesaffectingthenetassetsandliabilitiesoftheUCI

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VI.Acomparative tablecovering the last threeyearsand including, foreachfinancialyear,at theendof thefinancialyear:

thetotalNAV

theNAVpershareorunit

VII. Details,bycategoryofmoneymarkettransactionswithinthemeaningofArticle42carriedoutbytheUCIduringthereferenceperiod,oftheresultingamountofcommitments

The 2002 Law (see Section 2.2.1.) requires certain disclosure regarding management fees where a UCITS invests asubstantialproportionof itsassets inotherUCIs.ThemaximumlevelofmanagementfeeschargedbothtotheUCITSitselfandtootherUCIsinwhichitinvestsmustbedisclosed.Inaddition,ChapterHofCircular91/75requirescertaindisclosuresfortechniquesandinstruments.ThisCirculariscurrentlybeingamendedtorealignitwiththe2002Law.

TherequirementsofVaregenerallydisclosedinthestatementofincomeandexpenditureandstatementofchangesinnetassets.Astatementofchangesinthenumberofsharesoutstandingisalsonormallyincluded.Itisnotrequiredtodiscloseindividualandtotalcostoftheinvestments.Comparativefiguresarealsonotinpracticedisclosed.

Theannualreportistobesenttotheshareholdersorunitholders.However,anabridgedannualreport(comprisingreportonactivities,auditor’sreport,statementsofnetassets,operationsandchangesinnetassets)maybesenttoshareholdersorunitholders,providedthisissostatedintheprospectusandprovidedthefullannualreportisavailablefreeofchargetoshareholdersorunitholdersonrequest.

TheannualreportofaUCIcompany(SICAVorSICAFbutnotFCP)hastoberegisteredattheTradeRegister(Registre de Commerce et des Sociétés Luxembourg-RCSL)inoneoftheofficiallanguages(beingFrench,GermanandLuxembourgish)orEnglish.

8.1.2. Semi-Annual Report

Anunauditedsemi-annualreportistobepublished(andsenttotheCSSF)withintwomonthsoftheperiodend,disclosingtheinformationspecifiedinSection8.1.1.I–IV.Astatementofincomeandexpenditureisnotobligatory.However,whereaninterimdividendispaidorproposed,theresultsaftertaxforthehalf-yearandtheamountofsuchdividendmustbedisclosed.

Thesemi-annualreportistobesuppliedfreeofchargetoshareholdersorunitholdersonrequest.

8.1.3. Umbrella Funds

InthecaseofmultiplecompartmentUCIs,alltheannualandsemi-annualinformationoutlinedinSections8.1.1.and8.1.2.isrequiredforeachcompartment.Eachcompartmentmayhavedifferentdenominatedcurrencies.AggregatedfiguresofthefinancialstatementsarerequiredtobeshownintheUCI’sdenominatedcurrency.

Inadditiontothefullreport,multiplecompartmentUCIsmayprovideforthepublicationofseparatefinancialreportsforeachoftheircompartments.Suchreportsmustincludeeithertheauditor’sgeneralreportoraseparateauditreportforeachcompartment.

8.1.4. Monthly and Annual Financial Information to be sent to the CSSF and to STATEC via CCLux

TherolesofCCLuxarethecollection,managementanddisseminationoffinancialinformationrelatedtotheLuxembourgregisteredinvestmentfunds.

Monthlyandannualfinancialinformationistobesent,viaCCLux,to:

theCSSF,forstatisticalandsupervisorypurposes

theCentralServiceforStatisticsandEconomicStudies(Service Central de la Statistique et des Etudes Economiques –STATEC)forthepreparationofthenationalaccountsandtheLuxembourgbalanceofpaymentsfigures.

CCLux has been contracted to collect the financial information in electronic format and transmit it to the CSSF andSTATEC.

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ThecontentsofthemonthlyandannualfinancialinformationaresetoutintheCircular97/1�6of1�June1997whichreplacesChapterMofCircular91/75(andthetableappendedtothatchapter).Theinformationmustbepreparedseparatelyforeachsub-fund.Consolidatedinformationisnotrequired.Themonthlyandannualinformationistobesubmittedwithin20daysandfourmonthsofthereferencedate,respectively.

Monthlyinformationincludesdetailsof:

I. Informationonthemonth-endnetassetvalue

II. Percentagevalueoftheinvestmentfundportfolioinrelationtototalnetassetsatmonth-end

III. Informationonthenumberofsharesorunitsissuedorredeemedinthecourseofthemonthofreference

IV. Informationoninvestmentincomeinthecourseofthemonthofreference

V. Informationondistributionsmadeinthecourseofthemonthofreference

Annualinformationincludesdetailsof:

I. Statementofnetassets

Totalassets

Totalliabilities

Netassetsattheendoftheyear

II. Statementofoperations

Totalincome

Totalcharges

Netinvestmentincome

Profitorlossonoperations

III. Statementofchangesinnetassets

Netassetsatthebeginningoftheyear

Netassetsattheendoftheyear

IV. Changesintheinvestmentportfolio

Totalpurchasesoftransferablesecuritiesandotherinvestments

Totalsalesoftransferablesecuritiesandotherinvestments

V. Analysisofthesecuritiesportfolioandofliquidassetsotherthancashatbank

VI. CountriesinwhichtheUCIsaremarketed

Forwardtransactionsandoptions

I. Commitmentsattheyearendarisinginrespectoftransactionsenteredintoforpurposesotherthanhedging

II. Premiumsreceivedandpaidinrespectofoptionscontractsinthecourseofthefinancialyear

8.1.5. Audit

General Rules

Theauditrequirementsandauditors’responsibilitiesarecoveredinArticle11�ofthe2002LawandCirculars02/77(onerrorsandbreaches)and02/81(onthelongformreport).Auditorsareboundbytheobligationofprofessionalsecrecy.

TheannualreportistobeauditedbyaLuxembourgauthorizedindependentauditor,amemberoftheLuxembourgInstituteofAuditors(Institut des Réviseurs d’Entreprises–IRE),whoshallalsobesuitablyqualifiedintermsofrelevantexperience.TheauditisconductedinaccordancewithInternationalStandardsonAuditing(ISAs)issuedbytheInternationalFederationofAccountants(IFAC),asadaptedorsupplementedbytheCSSF.Theauditreportistobereproducedinfullineachannualreport.

TheauditormustreportpromptlytotheCSSFwhereinformationprovidedtoinvestorsortheCSSFdoesnottrulydescribethefinancialsituationandanyfactordecisionofwhichhehasbecomeawareduringtheauditofaUCIwhichisliableto:

ConstituteamaterialbreachoftheLaworregulations

AffectthecontinuousfunctioningoftheUCI

Leadtoarefusaltocertifytheaccountsortothequalificationofhisreport.

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TheCSSFmaydeterminerulesregardingthescopeoftheauditandtheauditor’sreportandmayrequestauditorstocarryoutspecialaudits.

UCIsmustimmediatelysendtotheCSSF,withoutbeingspecificallyrequestedtodoso,thecertificates,reportsandwrittencommentaries(inparticularthe“managementletter”)issuedbytheindependentauditor,inaccordancewithChapterPofCircular91/75.

Theauditormustalsointerveneandhascertainreportingrequirementsinthecaseoferrorsandbreachesofinvestmentrestrictions(seeSection9.2.(d)and9.�.).

Circular 02/81 on Long Form Reports

ThisCircular,whichwaspublishedon6December2002andcontainsexternalauditguidelines,introducedtherequirement(witheffectfrom�1December200�yearends)fortheauditortosubmitalongformreporttothedirectorsandCSSFforeachUCI(InstitutionalUCIsareexempted).

Thetopicstobecoveredinthelongformreportareasfollows:

1. Organizationalstructure

1.1. Centraladministration

1.1.1.Reliancebyfund’sauditoronareportissuedbytheauditorofthecentraladministration

1.1.2.Audittestsandproceduresconductedbyfund’sauditor

1.1.2.1. Assessmentofprocedures

1.1.2.2. Computersystems

1.2. Custodianbank

1.2.1.Reliancebyfund’sauditoronareportissuedbytheauditorofthecustodianbank

1.2.2.Audittestsandproceduresconductedbyfund’sauditor

1.2.2.1. Assessmentofprocedures

1.2.2.2. Computersystems

1.2.2.�. Resultsofreconciliations

1.�. Relationshipwithmanagementcompany

1.4. Relationshipswithotherintermediaries

2. Testsoftransactionsandprocedures

2.1. Anti-moneylaunderingprocedures

2.2. Valuationmethods

2.�. Riskmanagementsystem

2.4. Specifictests

2.5. Statementofassets&liabilitiesandincome&expenditureaccount

2.6. NAVpublication

2.7. LateTradingandMarketTiming

�. Internet

4. Investorcomplaints

5. Follow-upofissuesraisedinpreviouslongformfundauditreports

6. Overallconclusion

Additional Provisions Regarding Late Trading and Market Timing

Circular04/146includedprovisionsontheroleoftheauditorregardinglatetradingandmarkettiming(seeSection6.�.)whichareadditionaltothoseofCircular02/81.

TheauditoroftheUCIcheckstheproceduresandcontrolsputinplacebytheUCIsoastoprotectitselffromlatetrading practicesanddescribestheseinits longformreport.ForUCIswhich,duetotheirstructure,arelikelytobesubject tomarkettiming practices,theauditorchecksthemeasuresand/orcontrolsputinplacebytheUCItoprotectitselfbythebestpossiblemeansagainstsuchpracticesanddescribessuchmeasuresand/orcontrolsinitslongformreport.

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IftheauditoroftheUCI,duringtheperformanceofitsduties,becomesawareofacaseoflatetradingormarkettiming, itmustbeindicatedinthelongformreport.

Incaseofindemnificationofinvestorsharmedbylatetradingormarkettimingpracticesduringtheaccountingyear,theauditormustgive,inthelongformreport,anopinionastowhetherinvestorshavebeenadequatelyindemnified.

8.2. Under the SIF Law

SIFsarerequiredtoproduceanannualreportwhichmustbemadeavailabletoinvestorswithinsixmonthsoftheendofthefinancialyear.ItmustalsobecommunicatedtotheCSSF.Itisnotnecessarytodisclosedetailsoftheportfolio,thoughenoughquantitativeand/orqualitativeinformationforinvestorstomakeaninformedjudgmentabouttheevolutionoftheactivityandresultsofthefundshouldbeprovided.

Theannual report is tobeauditedbyaLuxembourgauthorized independentauditor,amemberof IRE,whoshallalsobesuitablyqualifiedintermsofrelevantexperience.Nolong-formreportisrequired.

Thereisnorequirementtoproduceasemi-annualreport.Noristhereanyrequirementtopublishthenetassetvalue(NAV)pershare.

Inasimilarmannertofundsunderthe2002Law,SIFsarerequiredtosubmit,electronicallyviaCCLux,monthlyandannualinformationtotheCSSF,forstatisticalandsupervisorypurposes.

ThecontentsofthemonthlyandannualfinancialinformationaresetoutintheCircular07/�10andisthesameasthatrequiredtobesentbyfundsunderthe2002Law,asnotedinsection8.1.4.Theinformationmustbepreparedseparatelyforeachsub-fund.Consolidatedinformationisnotrequired.Themonthlyandannualinformationistobesubmittedwithin20daysandsixmonthsofthereferencedate,respectively.

Ingeneral,themonthenddateshouldbethereferencedateonwhichtheCSSFreportingisbased.However,inthecaseoffundswhoseNAViscalculatedonaweeklybasis,thelastNAVcalculatedbeforetheendofthemonthmaybeusedforCSSFreportingpurposes.

Similarly,if,inthecaseofmonthlyvaluedfunds,thedateofcalculationoftheNAVfallsduringtheweekpriortothemonthendorsubsequenttothemonthend,theinformationsenttotheCSSFshouldbethatrelatingtotheNAVclosesttothemonthenddate.

IncaseofSIFswhoseNAVisnotcalculatedonamonthlybasis,themonthlyinformationsenttotheCSSFshouldbethatofthelastavailableNAV.

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9. Errors, Materiality and Compensation to Investors

9.1. Introduction

Circular02/77,entitledProtection of investors in UCIs in case of NAV computation error and compensation for losses arising from non-compliance with applicable investment restrictions,establishesguidelinesfortheLuxembourgfundindustrywhendealing with errors. It introduced a simplified reporting procedure for material errors and active breaches where the totalcompensation does not exceed €25,000 and the amount payable to a single investor does not exceed €2,500.

ErrorsgenerallyrelatetoNAVerrorsorinstancesofbreachesoftheinvestmentpolicyoninvestmentorborrowinglimitsasspecifiedineithertheprospectusortheLaw.

It is the responsibilityof thepromotersof aUCI to ensure that anyerrors areproperlydealtwith in accordancewith theCircular.

The Circular distinguishes the procedures to be followed between NAV computation errors and breaches of investmentrestrictions,asoutlinedinSections9.2.and9.�.

9.2. Treatment of NAV Computation Errors

Definition of a NAV Computation Error

ANAVcomputationerroroccurswhere thereareoneormorefactorsorcircumstanceswhich lead to thecomputationprocessproducinganinaccurateresult.Asageneralrule,suchfactorsorcircumstancesmaybeputdowntoinadequateinternalcontrolprocedures,managementdeficiencies,failingsorshortcomingsincomputersystems,accountingsystemsorcommunicationsystems,orindeedtonon-compliancewiththevaluationruleslaiddownintheUCI’sconstitutionaldocumentsorprospectus.

Concept of Materiality in the Context of NAV Computation Errors

ItisgenerallyacknowledgedthattheNAVcomputationprocessisnotanexactscienceandthattheresultoftheprocessistheclosestpossibleapproximationoftheactualmarketvalueofaUCI’sassets.ItisacceptedpracticeinthemajorityofleadingfundadministrationcenterstorecognizeonlythosecomputationerrorswithamaterialimpactontheNAV.

TheCircularintroducestheconceptofmaterialitytoLuxembourgUCIsandsetstheacceptabletolerancelimitsforthedifferenttypesoffunds.ThisdifferentiatedapproachiswarrantedbythefactthatthedegreeofinaccuracyinherentinagivenNAVcomputationmayvaryfromonetypeofUCItoanotherduetoexternalfactors,suchasmarketvolatility.

TheacceptabletolerancelimitsforthedifferenttypesofUCIsareasfollows:

%ofNAV

Cashfunds 0.25%

Bondfunds 0.50%

Equityandotherfunds 1.00%

Mixedfunds 0.50%

Promotersareofcoursefreetosettolerancelevelsbelowthoselistedaboveoreventoadoptapolicyofzerotolerance.TheprocedurestobefollowedintheCircular,however,areonlyobligatoryformaterialerrorsusingthetolerancelevelsabove.ItisamatterfortheboardofdirectorsofaUCI(oritsmanagementcompanyinthecaseofanFCP)toensurethatwheretheUCI’sshares/unitsaredistributedinaforeignjurisdiction,theproposedtolerancelevelsdonotconflictwithlocalrequirements.

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Amaterialerrormaynotjustbeanisolatederrorbutalsoseveralerrorswhichinaggregateexceedthematerialitylimit.

TheobligationtocompensatelossesappliesonlytothosevaluationdaysaffectedbyamaterialNAVcomputationerror.

Corrective Action for Material NAV Computation Errors

a) Reporting to the Promoter, Custodian, CSSF and External Auditor

ImmediatelyupondiscoveryofamaterialerrortheUCI’scentraladministrationmustnotifythepromoter,custodian,theCSSFandtheexternalauditorandsubmittothepromoterandsupervisoryauthorityaremedialactionplandealingwiththecorrectiveactionproposedoralreadytakentoresolvetheproblemswhichcausedtheerrorandmakeappropriateimprovementstoexistingadministrativeandcontrolstructurestoavoidarecurrenceofthefailure.Theremedialactionplanshallfurtherdetailtheactionproposedoralreadytakeninorderto:

Determinecategoriesofinvestorsaffectedbytheerror

Re-computeNAVsusedforsubscriptionsandredemptionsduringtheperiodtheerrorbecomematerialandthedateofcorrection(“errorperiod”)

Determineon thebasisof the re-computedNAVs theamounts tobepaid into theUCIand to the investorsascompensation

Notifythesupervisoryauthoritiesinthoseforeignjurisdictionswheretheshares/unitsaresold,wheresorequiredbysuchauthorities

Adviseinjuredinvestorsoftheerrorandthearrangementsforcompensation.

b) Quantifying the Financial Impact of a Computation Error

Thecentraladministrationmustremedytheerrorasswiftlyaspossible.

Forthepurposeofquantifyingthefinancialimpactofacomputationerror,theUCI’scentraladministrationshallmakeadistinctionbetween:

Existinginvestorspriortotheerrorperiodwhoredeemedduringtheerrorperiod

Newinvestorsduringtheerrorperiodwhoheldtheirshares/unitsbeyondtheendoftheerrorperiod.

The following gives an overview of the position of a UCI and its investors where the NAV is understated oroverstated:

NAV UnderstatedExisting investors before the error period who redeemed their shares/units during the error period must becompensatedforthedifferencebetweenthere-computedNAVandtheoriginalunderstatedNAVusedasthebasisfortheirredemptiontransaction

TheUCImustbecompensatedforthedifferencebetweenthere-computedNAVandtheoriginalunderstatedNAVasappliedtosubscriptionsduringtheerrorperiodforshares/unitsheldbeyondtheendoftheerrorperiod

NAV Overstated TheUCImustbecompensatedforthedifferencebetweentheoriginaloverstatedNAVasappliedtoredemptionsduringtheerrorperiodofshares/unitsheldpriortotheerrorperiodandthere-computedNAV

New investors during the error period who held their shares/units beyond the end of the error period must becompensatedforthedifferencebetweentheoriginaloverstatedNAVasappliedtosuchsubscriptionsandthere-computedNAV

InvestorsincurringalossasaresultofanerrormaybecompensatedoutoftheassetsoftheUCIwheresuchpaymentsrepresenttherefundofexcessreceiptsbytheUCI.AlternativelytheUCI’spromoterorcentraladministrationmay,asappropriate,electtobearthecostofsuchcompensation.

ThequestionarisesastowhetheraUCIwhichhassustainedalossasaresultofacomputationerrorhastherighttolooktoinvestorswhohaveunknowinglybenefitedfromtheerrortomakegoodafterthefactanyunderpaymentforasubscriptionbasedonanunderstatedNAVoranyexcessreceiptfromaredemptionbasedonanoverstatedNAV.Asthisisasomewhatcontroversialissuetowhichnoclearanswermaybegivenintheabsenceofajudicialrulingonthematter,theCirculardoesnotadvocaterecoursetoinvestorsforcompensationoflossessustainedbytheUCI,exceptwhereinstitutionalorotherexpertinvestorsareconcerned,andwheresuchinvestorshaveexplicitlyandknowinglyagreedtoindemnifytheUCIforsuchlosses.

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Itisinprincipleforthecentraladministration,or,asappropriate,thepromotertomakegoodanylosstotheUCI.

AssoonasthemisstatedNAVshavebeenre-computedtheappropriateaccountingentriesmustbeenteredintheUCItorecordthecompensationpaymentsreceivableand/orpayable.

c) Payment of Compensation for Losses Incurred

Theobligation to compensate losses incurredby theUCI and/or its investors appliesonly to thosevaluationdaysaffectedbyamaterialNAVcomputationerror.

TheUCI’scentraladministrationmustexpeditethecompensationpaymentstotheUCIand/ortheinjuredinvestorssubjecttocompletionoftheexternalauditor’sreview(seed)).InordertospeedupthecorrectionprocesstheUCI’scentraladministrationmaybeginworkonthevariousstepsinvolvedwithoutpriorauthorizationoftheCSSFwhomaybeinformedofactiontakenaftertheevent.

Where, as a result of a NAV computation error the amount of compensation does not exceed €25,000 and the amount payable to an investor does not exceed €2,500, the central administration must expedite the release of the amounts of compensation due to the fund and/or injured investors as soon as such amounts of compensation have beenquantified.

TheCSSFmay,however,interveneifitdeemsitappropriate.

Inthemajorityofleadingcollectiveinvestmentcenters,fundmanagersarepermittedbythesupervisoryauthoritytoapplyde minimis(minimumamount)rulestocompensationamountsduetoindividualinvestors.Thisprocedureavoidsthesituationofinvestorswhoareentitledtorelativelymodestamountsofcompensationseeingthepaymenteffectivelynullifiedbybankandotherexpensesincurredbythem.LuxembourgUCIsarepermittedtoapplyde minimis rules.TheCSSFhasnotsetafixedde minimisastheappropriateamountmayvaryfromUCItoUCIdependinguponwhereitsshares/unitsaresold.ItisforeachUCItoset,withtheconsentoftheCSSF,itsproposedde minimis.Thede minimisrulemaynotbeusedtorefusecompensationtoinvestorswhohavespecificallyrequestedcompensation.

Inthecaseofinvestorswhostillholdshares/unitsintheUCI,theUCImayelecttocreditthem(withoutcharge)withnewshares/unitsratherthanbypayment.

Whereinjuredinvestorssubscribedviaanominee,theinvestorcompensation,willberemittedtothenominee,whoshallgiveanundertakingtotheUCI’scentraladministrationtoforwardtheamountstothebeneficialowner.

d) The Role of the External Auditor in Reviewing the Correction Process

As stated in a), when notifying the UCI’s promoter and custodian and the CSSF of the occurrence of a materialcomputationerror, theUCI’s central administration shall also advise theUCI’s external auditor andcommissionaspecialreport(firstreport)ontheappropriatenessofthemethodsintendedtobeusedinorderto:

determineinthemostappropriatemannerwhichcategoriesofinvestorsareaffectedbytheerror

re-computetheNAVsusedasthebasisforsubscriptionandredemptionordersreceivedduringtheperiodbetweenthedateatwhichtheerrorbecamematerialandthedateatwhichitwascorrected

determineonthebasisofthere-computedNAVstheamountstobepaidintotheUCIandtobepaidtoinvestorsbywayofcompensationforlossessustainedasaresultoftheerror.

Theauditreportcontainingconclusionsontheproposedmethodsshallbeattachedtothecompensationarrangementsdocumentreferredtoina).

Wherethecalculationerrorisdetectedbytheexternalauditor,itshallbereportedtotheUCI’scentraladministrationimmediately together with a request that the promoter, custodian and the CSSF be notified forthwith. Where theexternalauditorfindsthatthecentraladministrationhasfailedtocomplywiththisrequest,theCSSFshallbeadvisedaccordingly.

OncetheUCI’scentraladministrationhascompletedthecorrectionprocesstotheextentofmakingtheappropriateentriesintheUCI’saccountingrecords,theexternalauditorshallundertakeaspecialreviewandproducea(second)reportstatingwhether,inhisopinion,thecorrectionprocessisappropriateandreasonableinthecircumstances.Thereportshalldealwith:

Themethodsreferredtoabove

There-computedNAVsasoriginallymisstated

ThelosssustainedbytheUCIand/oritsinvestors.

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ThecentraladministrationshallforwardacopyofthespecialauditreporttotheCSSF,togetherwiththesupervisoryauthoritiesof thosejurisdictionsinwhichtheUCI’sshares/unitsareregisteredfordistribution,whererequestedbythem.

Theexternalauditorshallfinallyissueanattestation(thirdreport),totheeffectthatamountsofcompensationduetotheUCIand/orinjuredinvestorshavebeeneffectivelypaid.

A copy of this attestation shall also be forwarded to the CSSF and, where applicable to the authorities of foreignjurisdictionswheretheshares/unitsaresold.

e) Communicating with Injured Investors Entitled to Compensation

Materialcomputationerrorsmustbereportedtoinvestorsentitledtocompensation.

Thismaybeeitherbyindividualnotificationorannouncementinthepress,givingparticularsofthecomputationerrorandtheactiontakentocorrecttheerrorandcompensatetheUCIand/orinvestorsaffected.

DraftversionsoftheproposedcommunicationsmustbesubmittedtotheCSSF,togetherwiththesupervisoryauthoritiesofthosejurisdictionsinwhichtheUCI’sshares/unitsareregisteredfordistribution,whererequestedbythem.

f) Liability for Expenses Incurred in Remedying a Computation Error

Expensesincurredasaresultofremedialactiontakentocorrectacomputationerror,includingthecostofthespecialauditreport,shallnotbebornebytheUCI.TheyshallthereforebeborneinfullbytheUCI’scentraladministrationorbytheUCI’spromoter.

Itisthedutyoftheexternalauditortoensure,aspartofhisstatutoryreviewoftheaccountinginformationcontainedintheUCI’sannualreport,thatsuchexpenseshavenotbeenmetoutoftheassetsoftheUCI.

9.3. Compensation for Losses Arising from Non-Compliance with Investment Restrictions

Rectification of Non-Compliance

Immediatelyupondiscoveryofaninstanceofnon-compliancewithapplicableinvestmentrestrictions,themanagementoftheUCIshalltakeallappropriatemeasurestorectifythesituationinwhichtheUCIfindsitselfasaconsequenceofthenon-compliance.Inparticular:

Wherethenatureofthenon-complianceisthemakingofinvestmentsincontraventionoftheinvestmentpolicystatedintheUCI’sprospectus,theUCIshallarrangetodisposeofsuchinvestments.

WheretheinvestmentlimitsstipulatedbyLaworbytheUCI’sprospectushavebeenbreachedincircumstancesotherthanthoseprovidedforbyArticle46ofthe2002Law,theUCIshallarrangetodisposeoftheexcesspositions.

WheretheborrowinglimitsstipulatedbythelaworbytheUCI’sprospectushavebeenbreached,theUCIshallarrangetoreducetheexcessborrowingwithintheapplicablelimit.

Calculation of Compensation

Inthethreecasesreferredtoabove,theUCIshallseekcompensationforanylosssustainedbyit.

Inthefirsttwocases,theamountofsuchlossshallbedeterminedinprinciplebyreferencetothelossondisposaloftheunauthorizedinvestment.Inthethirdcase,theUCIshallinprincipleseekcompensationfortheamountofinterestpayableandothercostsattributabletotheunauthorizedportionoftheborrowing.

Wheremultipleinvestmentrestrictioncompliancefailuresoccur,compensationshallbesoughtforanyaggregatenetlossarisingasaresultoftherectificationsasawhole.

WheresuchrectifyingtransactionsproduceanaggregatenetprofittotheUCI,theUCIshallbeentitledtorecognizeandretainsuchprofit.Inthesecircumstances,theUCI’scentraladministrationneedsimplynotifytheCSSFandtheexternalauditor.

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Bywayofexception,wherewarrantedinallthecircumstances,alternativemethodsotherthanthoseoutlinedabovemaybeadoptedtodeterminetheamountoftheloss,including,inparticular,themethodwherebythelossisquantifiableintermsoftheperformancedifferentialhadtheunauthorizedinvestmentssustainedthesamemovementsastheauthorizedportfolioinvestedinaccordancewiththeinvestmentpolicyandinvestmentlimitsstipulatedbythelaworbytheprospectus.

Application of Materiality Levels

InJuly2004,theCSSFclarifiedtheapplicabilityofthematerialitylevels(seeSection9.2.)inthecaseofnon-compliancewithinvestmentrestrictions,asfollows:

TheUCImust alwaysbe compensated for losses resulting fromselling theunauthorized investmentor the excesspositionof this investmentor theexpensesattributable to theunauthorizedportionof theborrowing,whatever theimpactofthebreach;nomaterialitylevelsmaybeappliedtothesesituations.

IftherealizedlossshowsthattheimpactontheNAVexceedsthematerialitylevels(seeSection9.2.),theNAVmustbere-computedforthebreachperiodandtheUCIanditsinvestorswhichhavesufferedalossmustbecompensated.If, however, the realized loss shows that the impact on the NAV does not exceed the materiality levels, the NAVneednotbere-computedforthebreachperiodandtheUCIanditsinvestorswhichhavesufferedalossneednotbecompensated.

Responsibility for Compensation

Itistheresponsibilityofthepartywhichcausedthebreachthroughafailuretofulfillitsobligationstomakegoodtheloss.Inallothercircumstances,thepromotershallberesponsibleforrectifyingtheloss.

Remedial Action Procedures

ThesameprocedurefordeterminingwhatremedialactionisrequiredincasesofNAVcomputationerrortogetherwiththat required where as a result of a NAV computation error the amount of compensation does not exceed €25,000 and the amount payable to an investor does not exceed €2,500, shall apply as is appropriate in the circumstances to cases of non-compliancewithinvestmentrestrictions.Specificreferenceismadeinthiscontexttothemandatoryprocedureswhichdealwith:

ReportingtothepromoterandthecustodianoftheUCIandtotheCSSF

DeterminingwhichcategoriesofinvestorhavebeeninjuredbythelosssustainedbytheUCI

Quantifyingthefinancialimpactofthelossforindividualinvestorsandmakingarrangementsfortheircompensation

Theroleoftheexternalauditorinreviewingthecorrectionprocess

Communicatingwithinjuredinvestorsentitledtocompensation.

Withrespecttoinvestorcompensationarrangements,theproceduresetoutin9.2.c)shallapply.

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Taxation of UCIs10

10. Taxation of UCIs

10.1. General

LuxembourgUCIsdonotpayLuxembourgprofitandcapitaltaxeswiththeexceptionoftheinitialcapitaldutyonincorporationandannualsubscriptiontax.ThereisnostampdutyinLuxembourgonshareissuesortransfers.

10.2. Capital Duty on Incorporation

A fixed capital duty of €1,250 is payable by UCIs on incorporation. The capital duty is fixed and does not vary with the number ofsub-funds.Nofurthercapitaldutyispayableonsubsequentcapitalincreasesorontheissuanceofnewunits.

AsFCPsareco-proprietorshipswithoutlegalpersonality,theyareinprinciplenotsubjecttocapitalduty.Thecapitaldutyisduefromthemanagementcompany,butitmaybechargedtotheFCP.ThespecifictaxregimeofamanagementcompanyisdealtwithinChapter14.

10.3. Subscription Tax

General Tax Rate – 0.05% of Net Assets

UCIsaresubjecttoanannualsubscriptiontaxof0.05%.Thistaxispayableandcalculatedquarterly,basedonthetotalNAVoftheUCIonthelastdayofeverycalendarquarter.

OnincorporationoftheUCI,thistaxiscalculatedinproportiontotheduration,indays,betweenincorporationandtheendofthefollowingquarter.Foreachadditionalcompartmentincorporatedthereafter,thetaxbaseremainsthetotalNAVonthelastdayofeachquarter.

OnthedissolutionoftheUCI,thesubscriptiontaxiscalculatedinproportiontothenumberofdaysbetweenthebeginningofthelastquarterandthedissolution(appointmentofliquidatorinthecaseofaninvestmentcompany).

Reduced Tax Rate – 0.01% of Net Assets

a) UCIs investing in money market instruments and deposits

Therate is reduced to0.01%forUCIsandUCIcompartmentswhoseexclusivepolicy is the investment inmoneymarketinstrumentsordepositswithcreditinstitutions.

AsclarifiedintheGrandDucalRegulationof14April200�,suchmoneymarketinstrumentsaredeemedtoincludeanynotesandinstrumentsrepresentingclaims,whetherornottheymaybecharacterizedassecurities,includingbonds,certificatesofdeposit, treasurybillsandanyothersimilarinstrumentsprovidedthatat thetimeoftheiracquisitiontheirresidualmaturitydoesnotexceedtwelvemonths,takingaccountofanyrelatedhedgingfinancialinstruments.Inaddition,floatingratenoteswitharesidualmaturityexceedingtwelvemonthsarepermittedprovidedtheinterestrateisadjustedtomarketconditionsatleastannually.Incertaincases,aUCIwhoseportfoliohasanaverageremainingmaturitynotexceedingtwelvemonthsmayalsoqualifyforthereducedrate.

Itshouldbenotedthatthecriteriafor“moneymarketinstruments”forthepurposeofsubscriptiontaxisdifferenttothecriteriaforthepurposesofUCITS(PartIfundsunderthe2002Law)8.PartIUCITSmaythereforequalifyforthereducedsubscriptiontaxeventhoughtheyarenotmoneymarketfundsunderthe2002Lawdefinition.

8 Money market funds under the definition of the 2002 Law cannot be UCITS but can be Part II UCIs.

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b) SIFs

Therateisreducedto0.01%forUCIswhicharesubjecttotheSIFLaw.

c) Institutional Investor Compartments or Share Classes

Thereducedrateofsubscriptiontaxof0.01%alsoappliestoindividualcompartmentsofmultiplecompartmentUCIssubjecttothe2002Law,aswellastoindividualshareclassesofaUCIorofacompartmentofamultiplecompartmentUCI,ifthesharesofthesecompartmentsorclassesarerestrictedtooneorseveralinstitutionalinvestors.

TheCSSFmaintainsalistofthoseUCIcompartmentswhichmeettherequirementforthereducedrateofsubscriptiontax(exceptinstitutionalcompartments/shareclassesofUCIswhicharesubjecttothe2002Law–seeSection1.�.1.).Registrationonsuchlistismadeattherequestoftheapplicant.Theprospectusmustspecificallyindicatetherequiredinvestmentpolicy.Thereducedrateofsubscriptiontaxforinstitutionalcompartments/shareclassesofUCIssubjecttothe2002LawmaybeappliedwithoutpriorapprovaloftheCSSF.

Exemption

a) Investment in other Luxembourg UCIs

Inordertoavoiddoubletaxation,thevalueofassetsrepresentedbyinvestmentsinotherLuxembourgUCIs,whichhavealreadybeensubjecttosubscriptiontax,isexempt.

b) Institutional Cash UCIs

UCIs,compartmentsofmultiplecompartmentUCIsandshareclassesareexemptfromthesubscriptiontaxprovidedallofthefollowingconditionsaremet:

(i) Thesharesarereservedforinstitutionalinvestors

(ii) Theexclusivepolicyistheinvestmentinmoneymarketinstrumentsordepositswithcreditinstitutions

(iii) Theweightedresidualportfoliomaturitydoesnotexceed90days(floatingratenoteswithamaturityexceeding90daysbutwhoseinterestrateisadjustedatleastevery90daysarealsopermitted)

(iv) TheUCIbenefitsfromthehighestpossiblerankingbyarecognizedrankingagency.

c) Pension Fund Pooling Vehicles (PFPVs)

PFPVsareexemptfromsubscriptiontax.

Seesection�.�.forfutherinformationonPFPVs.

10.4. Directors’ Fees

Awithholdingtaxof20%isleviedonthegrossamountofthefees(equivalentto25%ofthenetamountofthefees)atthetimeofdistribution.

Thewithholdingtaxwillbefinalfornon-residentdirectorsprovidedthatthisistheironlyLuxembourgsourceincomeandprovided this income does not exceed €100,000.

Thewithholdingtaxmustbepaid to therelevant taxauthoritywithineightdaysasfromthedistribution.Aregisterof thewithholdingtaxesmustbekeptuptodate,recordingthenameandaddressofthebeneficiary,theamountofthetaxwithheldandthedatewhenthetaxwaspaid.

10.5. Withholding Taxes on Dividends Paid by Luxembourg UCIs

TherearenowithholdingtaxesondividendspaidbyLuxembourgUCIs,exceptpossibly,inapplicationoftheEUSavingsDirective.PleaserefertoSection10.8.forclarificationoftheapplicationofEUSavingsDirective.

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10.6. Withholding Taxes on Revenue Received by Luxembourg UCIs

LuxembourgUCIsmaybesubjecttowithholdingtaxondividendsandinterestandtotaxoncapitalgainsinthecountryoforiginoftheirinvestments.

OnlycertaindoubletaxationtreatiessignedbyLuxembourgareapplicabletoLuxembourgfunds.Treatieswiththefollowing26countriesshouldbeapplicabletoSICAVsandSICAFs:

Austria Israel Portugal TrinidadandTobagoChina Korea Romania TunisiaDenmark Malaysia Singapore TurkeyFinland Malta SlovakRepublic UzbekistanGermany Mongolia Slovenia VietnamIndonesia Morocco SpainIreland Poland Thailand

Theapplicabilityofsuchdoubletaxationtreaties,however,isnotalwaysclear.InprincipleFCPswillnotbenefit(with,inpractice,certainexceptions)unless theunitholdersthemselvesareabletoclaimthereducedrateunderthedoubletaxationtreaty,which,inpractice,maybeverydifficult.

AUCImayestablishasubsidiaryinordertobenefitfromadoubletaxationtreaty;thisisnowthepracticeforinvestingincertaincountries.

AtableofwithholdingtaxratesapplicabletoLuxembourgUCIs,preparedinspring2007,isshowninAppendixI.

10.7. Tax on Dissolution

Mergers,demergersanddissolutionsofaLuxembourgUCIgenerallydonotgiverisetothelevyingofaLuxembourgtax.

SincetheimplementationoftheEUSavingsDirectiveintoLuxembourglaw,mergersoffunds,sub-fundsandshareclassesofLuxembourgUCIsmayundercertainconditionstriggertheapplicationoftheregulationsoftheEUSavingsDirectiveandhenceawithholdingtaxdeduction.PleaserefertoSection10.8.formoreinformation.

ThetransformationofaSICAVintoanFCPandsimilarlyofanFCPintoaSICAVhasnoimpactforLuxembourgtaxpurposes.OneshouldhoweverpayattentiontoapossibleimpactoftheEUSavingsDirective.

PleaserefertoSection10.�.onthesubscriptiontaxappliedonthedissolutionofaUCI.

10.8. EU Savings Directive

Content of the Law on the Taxation of Savings Income

On1July2005,theEUDirectiveonthetaxationofsavingsincomeintheformofinterestpayments(theEUSavingsDirective)and thebilateralagreementswithcertaindependentorassociated territoriesandwithcertain thirdcountriesintroducingmeasuresidenticalorequivalenttothoseoftheEUSavingsDirective(the“BilateralAgreements”),cameintoeffect.

TheLuxembourglawimplementingtheEUSavingsDirectiveandthelawimplementingtheBilateralAgreementsalsocameintoforceon1July2005.

TheaimoftheEUSavingsDirectiveistoenablesavingsincomeintheformofinterestpaymentsmadeinoneMemberStateoftheEUtobeneficialownerswhoareindividualsresidentinanotherMemberStatetobemadesubjecttoeffectivetaxationinaccordancewiththelawsofthelatterMemberState.

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ThemainaimoftheBilateralAgreementsistoensurethatmeasuresequivalentoridenticaltothoseoftheEUSavingsDirectiveapply to interestpaymentsmade inoneof thesignatorydependent territoriesor thirdcountries tobeneficialownerswhoareindividualsresidentinanEUMemberState.

Tobringabouteffectivetaxationofinterestpaymentsinthebeneficialowner’sMemberStateofresidencefortaxpurposes,allMemberStatesandsignatorydependentterritoriesandthirdcountriesagreedtheywouldultimatelyapplyautomaticexchangeofinformationconcerninginterestpaymentsbetweenMemberStates.

However,inviewofcertainstructuraldifferences,whereas22MemberStatesappliedexchangeofinformationwitheffecton1July2005,andthetwonewMemberStates,RomaniaandBulgaria,havedonesosincejoiningtheEUinJanuary2007,Austria,BelgiumandLuxembourgwill insteadapplywithholdingto“inscope”interestpaymentsduringatransitionalperiod,atarateof15%until�0June2008,20%from1July2008to�0June2011,and�5%thereafter.

ThirdcountriesandassociatedordependentterritoriesthathavesignedBilateralAgreementshaveeither:

appliedexchangeofinformationwitheffecton1July2005or

areapplyingwithholdingtaxatratesatleastashighasAustria,BelgiumandLuxembourguntilsuchtimeastheyswitchtotheexchangeofinformation(seetablesbelow).

Austria,BelgiumandLuxembourgwillbeobligedtoapplytheexchangeofinformationon“inscope”interestpayments,afterallofthethirdcountriesandassociatedordependentterritoriesthathavesignedBilateralAgreementshaveswitchedtotheexchangeofinformation.

Moreover,basedontheBilateralAgreementsconcludedwithcertainassociatedanddependentterritories,themeasuresintroducedbytheEUSavingsDirectivealsoapplytopaymentsofinteresttoindividualsresidentinJersey,Guernsey,theIsleofMan,theBritishVirginIslands,Montserrat,theNetherlandsAntillesandArubawhereapayingagentestablishedinaMemberStatepaysorsecuresthepaymentofinteresttotheseindividuals.

Exchange of information jurisdictions

Anguilla Finland Latvia Slovakia

Aruba France Lithuania Slovenia

Bulgaria Germany Malta Spain

CaymanIslands Gibraltar Montserrat Sweden

Cyprus Greece TheNetherlands UnitedKingdom

CzechRepublic Hungary Poland

Denmark Ireland Portugal

Estonia Italy Romania

Withholding tax jurisdictions

Andorra Guernsey Luxembourg Switzerland

Austria IsleofMan Monaco TurksandCaicosIslands

Belgium Jersey NetherlandsAntilles

BritishVirginIslands Liechtenstein SanMarino

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Investments Potentially in Scope

TheEUSavingsDirectiveandBilateralAgreementsapplyto“interest”payments.However,forthesepurposes“interest”isdefinedinabroadway.

Incomedistributedby-orincomerealizedupontheredemption,saleorrefundofsharesorunitsofanyofthefollowingmaypotentiallybequalifiedasinterestinthemeaningoftheEUSavingsDirective:

UCITSrecognizedinaccordancewiththeUCITSDirective(i.e.forLuxembourg,SICAVsorFCPsestablishedunderPartIofthe2002Law)

UCIsestablishedindependentorassociatedterritoriesorthirdcountriesthathavesignedBilateralAgreements,wheretheUCIisconsideredequivalenttoaUCITSinaccordancewithsuchBilateralAgreement(note:thesefundsarenotthesubjectofthisguide)

UCIsestablishedoutsidetheEUandthejurisdictionsthathavesignedBilateralAgreements(note:thesearenotthesubjectofthisguide)

“Residualentities”havingoptedtobetreatedasaUCITS(including,forLuxembourg,FCPsestablishedundertheSIFLaworPartIIofthe2002Law–seeexplanationbelow).

A“residualentity”isanentityestablishedinaMemberStateorincertainassociatedordependentterritorieswhichdoesnothave legalpersonality, isnotsubject togeneral rulesofbusiness taxation, isnotaUCITSandhasnotopted tobetreatedasaUCITSfor thepurposeof theEUSavingsDirective.TheLuxembourg law implementing theEUSavingsDirectivestatesthatallentitiesestablishedinLuxembourgthatwouldotherwisehavequalifiedasresidualentitiesmustbeconsideredashavingoptedforbeingtreatedasUCITS.Therefore,noLuxembourgFCPsareresidualentitiesaccordingtotheLuxembourglawimplementingtheEUSavingsDirectiveandincomedistributedby,orincomerealizedupontheredemption,saleorrefundofsharesorunitsofsuchFCPsisalwayspotentiallyinscope.

For Luxembourg investment funds potentially in scope, a distinctionhas to be made according to the typeof incomerealizedbythebeneficialowner.Thefollowingrulesapply:

Fordistributions,Luxembourghasoptedfor the“de minimis rule”, i.e.distributionsofUCITSwhichholddirectlyorindirectlynomorethan15%oftheirassetsintheformofin-scopedebtclaimsareoutofscopeoftheEUSavingsDirective.

The“de minimis rule”isonlyapplicableiftheMemberStatewheretheUCIisestablishedhasincludedthisruleinitsnationallaws(optionforeachMemberState).The“de minimis rule”alsoappliestocertaindependentorassociatedterritoriesorthirdstates.TheexerciseoftheoptionisbindingontheotherMemberStates.

Forredemptions,thesaleorrefundofsharesofLuxembourgfundsinvestingdirectlyorindirectlymorethan40%(25%asof1January2011)oftheirassetsinin-scopedebtclaimsareinscope.

Notethatonlythepartofthedistribution/salesorredemptionproceedswhichrelatestointerestincomeinthemeaningoftheEUSavingsDirectiveearnedbytheLuxembourgfundissubjecttotheDirective.Furthermore,uponsaleorredemptionofunitsorsharesbythebeneficialowner,onlyifagainisrealizedisthebeneficialownerdeemedtoderive“income”fromthesale.Iftheinformationonthepartofthedistributionthatderivesfrominterest(taxableincomedistributed–TID)isnotavailable,thewholedistributionwillbeconsideredasbeingderivedfrominterestincomefromthefund.Iftheinformationonthepartofthesalesorredemptionprice–ineffect,oftheNAVpershare-thatderivesfrominterest(taxableincomepershare–TIS)isnotavailable,theentiregainrealizedbythebeneficialowneruponsale/redemption,ifknown,ortheentireredemptionproceedswillbeconsideredasbeingderivedfrominterestincomefromthefund.

Whetherawithholdingtaxisleviedortheexchangeofinformationregimeappliesdependsonthecountryofestablishmentofthepayingagent(refertothetables).

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Paying Agent

Thepayingagentistheeconomicoperatorwhopaysinteresttoorsecuresthepaymentofinterestfortheimmediatebenefitofthebeneficialowner.

Inthepaymentchain,thepayingagentshouldbethelastintermediarythatactivelyinitiatesthepaymenttothebeneficialowner.

Whenaneconomicoperatorintervenesinapaymentprocessbuthasapassiverolebecauseitexecutesinstructionsgivenbysomebodyelse,thiseconomicoperatoris,fromaLuxembourgperspective,notnecessarilyapayingagent(e.g.whenabankholdscashaccountsandsimplyexecutesatransferinstructiongivenbyatransferagentorbyadebtor).

TheLuxembourgpayingagenthastolevyawithholdingtaxbydefault.However,thepayingagenthastogivethepossibilitytothebeneficialownernottobesubjecttowithholdingtaxbut,instead,tobesubjecttotheexchangeofinformationregime(where thebeneficialownerexpresslyauthorizes thepayingagent to report information)or toprovidea certificateofexemptionissuedbytheTaxAuthoritiesoftheMemberState(or,whereapplicable,ofthedependentorassociatedterritory)of residenceof thebeneficialownerof the income,confirming theauthority’sknowledgeof the sourceof the interestincome.

Withholdingtaxpaid inLuxembourgpursuant to theEUSavingsDirectivemustgiverise toa taxcredit; this is takenintoconsiderationinthecountryofresidenceofthebeneficialowner.Ifthewithholdingtaxdeductedexceedsthetotalamountofincometaxdueinthecountryofresidence,theexcessmustbereimbursedbythebeneficialowner’scountryofresidence9.

Inthisguide,onlyLuxembourginvestmentfundsarecovered.Note,however,thataLuxembourgpayingagentmayhavetowithholdtaxonincomedistributedbyaUCITSorUCIsregisteredincountriesotherthanLuxembourg,incaseswheresuchincomefallswithinthescopeoftheEUSavingsDirective.

9 The Member States should transfer the greater part of their revenue of the withholding tax to the Member State or dependent or associated territory of residence of the beneficial owner, i.e. the revenue sharing will be as follows:

25% for the Member State or dependent or associated territory that has levied the withholding tax75% for the Member State or dependent or associated territory of residence of the beneficial owner.

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Value Added Tax (VAT)11

11. Value Added Tax (VAT)

11.1. Introduction

InordertodeterminetheVATrateapplicabletoservicesrenderedtoUCIsandrelatedentities,thefollowingquestionsneedtobeanswered:

ArethesupplierandthepurchaserofservicesconsideredasVATablepersons?

Inwhichcountryistheservicedeemedtotakeplace?

IftheplaceofsupplyisinLuxembourg,whatistheapplicableVATregime?

11.2. Status of UCIs and Management/Advisory Companies

a) General – Supplier/Purchaser

An entity performing an economic activity has to be considered as aVATable person.Whether or not the supplier ofservicesisaVATablepersonwillbeoneofthecriteriatodeterminewhethertheservicerenderediswithintheVATscope.

Whether the purchaser of services is a VATable person is crucial to determine the place of supply of internationaltransactions.

b) FCPs and their Management Companies

AsanFCPhasnolegalpersonality,themanagementcompanyandtheFCPareconsideredtobeasingleentityforVATpurposes.

Consequently,servicesprovidedtoanFCParedeemedtobeprovidedtothemanagementcompany.ThecombinedlegalentityrepresentedbythemanagementcompanyanditsFCPisdeemedtobeaVATableperson.

c) SICAVs and SICAFs

UnlikeFCPs,investmentcompanies(SICAVsandSICAFs)havealegalpersonality.FollowingadecisionoftheEuropeanCourtofJustice10,SICAVsaretobeconsideredastaxablepersonsforVATpurposes.Inviewofthis,VATCircularNo72�of29December2006confirmedthatinvestmentvehicleswhosemanagementisVATexemptbyvirtueofarticle44,§1,d)oftheLuxembourgVATLawhavethestatusof“taxablepersons”forVATpurposes.

d) Management Companies

InLuxembourg,managementcompaniesareconsideredtoperformaneconomicactivity,andareconsequentlyregardedasVATablepersons.

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�0 Until recently, the Luxembourg VAT administration considered that SICAVs do not perform economic activities in the sense of the European and Luxembourg VAT legislation, since their activities consist of the collective investment in securities. As a consequence, SICAVs were not considered as taxable persons for VAT purposes.However, in the BBL case (C-8/03, 2�/�0/2004), the European Court of Justice (ECJ) highlighted the fact that the activities performed by investment funds investing in transferable securities surpass the scope of the simple acquisition and sale of securities and consist of the exploitation of an asset for the purpose of obtaining income on a continuous basis. Therefore, the activities carried out by SICAVs qualify as economic activities from a VAT point of view. Hence, SICAVs are now to be considered as taxable persons for VAT purposes Further to this ECJ decision, the Luxembourg VAT administration finally released VAT Circular No 723 on 29 December 2006. This Circular confirms the status of taxable person for VAT purposes of investment vehicles whose management is VAT exempt by virtue of article 44, §�, d) of the Luxembourg VAT law. This Circular entered into force on � April 2007.

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e) Advisory Companies

FromaLuxembourgperspective,advisorycompaniesofinvestmentcompaniesareconsideredtoperformaneconomicactivity,andareconsequentlyregardedasVATablepersons.

However,iftheystillbenefitfromthe1929HoldingCompanystatus,advisorycompaniesofinvestmentcompaniesarenotregardedasVATablepersons.

11.3. Place of Supply

a) General Rule

InordertodeterminetheVATregimeapplicabletoaservice,itisnecessarytoestablishthecountryinwhichtheserviceisdeemedtoberendered.

For services rendered by Luxembourg suppliers to a Luxembourg purchaser, the service is deemed to be rendered inLuxembourg.

Example: AnadvisoryserviceprovidedbyaLuxembourgbanktoaLuxembourgUCIisdeemedtohavebeenrenderedinLuxembourg.

ForservicesrenderedbyforeignsupplierstoaLuxembourgpurchaser,theplaceofserviceis,asageneralrule,consideredtobetheplacewherethesupplierhasitsregisteredoffice.

b) “Intellectual” or “Intangible” Services

Theso-called“intellectual”or“intangible”servicesaretheservicesprovidedforinstancebylawyers,advisers,accountants,auditors,consultantsandservicesinconnectionwithbanking,finance,insuranceandreinsurance.

WhereintellectualorintangibleservicesarerenderedbyaforeignsuppliertoaLuxembourgpurchaserconsideredasaVATableperson,theplaceofsupplyoftheseservicesisdeemedtobetheplacewherethepurchaserhasitsregisteredoffice,i.e.inLuxembourg.Moreover,theVATwillbeduefromthepurchaser(andnotthesupplier)underthe“reversechargemechanism”.

AsthemanagementcompanyestablishedinLuxembourgisconsideredtobeaVATableperson,intellectualorintangibleservicesrenderedtoitbyforeignsuppliersfallwithinthescopeofLuxembourgVAT.

Example: AnadvisoryserviceprovidedbyaforeigncompanytoaLuxembourgmanagementcompanyisdeemedtotakeplaceinLuxembourg.TheLuxembourgmanagementcompanyisliabletopayVATrelatingtothissupplyofservices(reversechargemechanism),unlessanexemptionapplies.

Asinvestmentcompaniesarenowconsideredastaxablepersons,theplaceofsupplyofservicesprovidedbyaforeignsuppliertosuchLuxembourgentitiesisdeemedtobewithinthescopeofLuxembourgVAT.

Example: AnadvisoryserviceprovidedbyaforeigncompanytoaSICAVis,fromaLuxembourgpointofview,deemedtotakeplaceinthecountryofestablishmentoftheSICAV(i.e.inLuxembourg).

Asadvisory1929HoldingCompaniesarenotconsideredasVATablepersons,theplaceofsupplyofservicesprovidedbyaforeignsuppliertotheseLuxembourgentitiesisdeemedtobeoutsidethescopeofLuxembourgVAT.

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11.4. Nature of Service and Applicable Rate

a) General Rule

Oncetheplaceofsupplyhasbeenestablished,itisimportanttodeterminetheapplicableVATrate,unlessanexemptionapplies.

Intellectualservicesaregenerallysubjecttothestandard15%VATrateiftheyarelocatedinLuxembourg.

Example: Lawyers’andtaxadvisors’servicesrenderedtoLuxembourgUCIsare,inprinciple,subjectto15%VAT.

Servicesnotconsideredtoconstituteintellectualservices,are,inprinciple,subjecttothestandard15%VATrate.

b) Domiciliary Services

Domiciliary servicesprovided toUCIs are considered tobepart of themanagement services,which are, in principle,exemptfromVATunderLuxembourglaw.

c) Management Service Based on a Direct Contractual Link

ManagementservicesprovideddirectlytoUCIssupervisedbytheCSSFareexemptfromVATinaccordancewithArticle44(1)(d)oftheLuxembourgVATLaw.

TheLuxembourglegislatordoesnotexpresslydefinethenotionofmanagementofUCIs.

PortfoliomanagementservicesaswellasUCIadministrationservicescomewithintheVATexemptionprovision11.ThefollowingservicesfallwithintheVATexemption(non-exhaustivelist),asconfirmedbytheLuxembourgVATadministrationinitsVATCircularNo72�:

Investmentmanagement

Administration:

Legalandfundmanagementaccountingservices

Customerinquiries

Valuationofportfolioandpricingoftheunits(includingtaxreturns)

Regulatorycompliancemonitoring

Maintenanceofunit-holderregister

Distributionofincome

Unitissuesandredemptions

Contractsettlements(includingcertificatedispatch)

Recordkeeping

Further to the releaseofVATCircularNo72�by theLuxembourgVATadministration, theVAT treatmentof custodyservices,theaimofwhichistoensurethatthemanagementisperformedincompliancewiththelaw,hasbeenconfirmed.Whilemostoftheservicesrenderedbycustodianbanksareexempt,thecontrolandsupervisoryactivities,asdefinedinarticles7§1and�,and14§1and�oftheUCITSDirective,arehenceforthtaxableattheVATrateof12%.

d) Management Services Classified as “Complete Services”

TheapplicationoftheexemptionofArticle44(1)(d)oftheLuxembourgVATLawhasbeenextendedtooutsourcedserviceswhencertainconditionsaremet.

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�� The Luxembourg Bankers’ Association (Association des Banques et Banquiers, Luxembourg – ABBL) together with the VAT Administration had laid down a non-exhaustive list of the services falling under the scope of the exemption. However, more recently, the ECJ, in the Abbey National case (C�69/04, 4/5/2006) confirmed that portfolio management services as well as UCI administration services fall within the VAT exemption provision. The ECJ, as well as the Luxembourg VAT administration in its VAT Circular No 723 ,referred to Annex II of the UCITS Directive and provided a non-exhaustive list of services falling within the VAT exemption.

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Inthisrespect,outsourcedservicesfallundertheexemptionprovidedtheprincipallimitsitsactivitytostrictlyre-chargingtheservicesreceivedfromthesub-contractortotheUCIsandthat,inthecaseofadministrativeandmanagementservicesof the fund, these services formadistinctwhole, fulfilling ineffect the specificandessential functionsof theexemptmanagementservices.Consequently,merematerialortechnicalsupplies,forinstance,arenotVATexempt.12

11.5. Summary Tables

ThesummarytableshereafterhavebeenpreparedbasedontheLuxembourglegislationanddoctrine,aswellastheECJcaselawandLuxembourgVATCircularNo72�.Indeed,itisimportanttonotethattheinterpretationofthelegislationcouldbedifferentincountriesotherthanLuxembourg,notablyconcerningtheVATstatusofUCIsandtheirmanagementcompanies,whichmighthaveanimpactonthelocalizationofthesupplyofservices.

a) “Intellectual” Services Provided to a Luxembourg SICAV or SICAF

Supplier Service Place of supply VAT treatment

Luxembourgcompany Managementservices Luxembourg Exempt

EUcompany(exceptLuxembourg)

Managementservices Luxembourg Exempt

USadvisorycompany Legaladvice Luxembourg15%VAT(reversechargemechanism

Luxembourgcentraladministration

Administrationservices Luxembourg Exempt

LuxembourgcustodianbankControlandsupervisoryservices

Luxembourg 12%VAT

Luxembourgauditor/lawyer/taxadvisor

Audit/legaladvice/taxadvice Luxembourg 15%VAT

EUlawyer(exceptLuxembourg)

Legaladvice Luxembourg15%VAT(reversechargemechanism)

b) “Intellectual” Services Provided to a Luxembourg FCP and to Management Companies

Supplier Service Place of supply VAT treatment

Luxembourgcompany Managementservices Luxembourg Exempt

EUcompany(exceptLuxembourg)

Managementservices Luxembourg Exempt

USadvisorycompany Legaladvice Luxembourg15%VAT(reversechargemechanism)

Luxembourgcentraladministration

Administrationservices Luxembourg Exempt

LuxembourgcustodianbankControlandsupervisoryservices

Luxembourg 12%VAT

Luxembourgauditor/lawyer/taxadvisor

Audit/legaladvice/taxadvice Luxembourg 15%VAT

EUlawyer(exceptLuxembourg)

Legaladvice Luxembourg15%VAT(reversechargemechanism)

�2 This is in accordance with the ECJ decision in the Abbey National case and has been reconfirmed by the Luxembourg VAT administration in Circular N° 723.

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c) “Intellectual” Services Provided to a Luxembourg Advisory 1929 Holding Company

Supplier Service Place of supply VAT treatment

Luxembourgcompany Managementservices LuxembourgExempt,ifthe“completeservices”schemecanbeapplied

EUcompany(exceptLuxembourg)

ManagementservicesEUcountryofestablishmentofsupplier

VATregimeofsupplier’scountryofestablishment

USadvisorycompany Legaladvice US NoVATintheUS

Luxembourgcentraladministration

Administrationservices Luxembourg

Exemptifthe“completeservices”schemecanbeappliedandiftheservicesarespecificandessentialtotheUCImanagement

Luxembourgauditor/lawyer/taxadvisor

Audit/legaladvice/taxadvice Luxembourg 15%VAT

EUlawyer(exceptLuxembourg)

LegaladviceEUcountryofestablishmentofsupplier

VATregimeofsupplier’scountryofestablishment

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12. Expenses

ThefollowingarethetypesofformationexpensesandannualrunningexpensesofLuxembourgUCIs:

Formation Expenses

Capital duty (fixed at €1,250)

Notaryfees

Legalfees

CSSFfilingduty

2002 Law UCIs: fixed at €2,650 for a single compartment UCI and €5,000 for a multiple compartment UCI

SIF Law UCIs: fixed at €1,500 for a single compartment UCI and €2,650 for a multiple compartment UCI

Stockexchange

Admission fee (fixed at €1,250)

Bank’sfeeforlisting

Printingofprospectus

Printingofbearercertificates

Annual Running Expenses

CSSFfee

2002 Law UCIs: fixed at €2,650 for a single compartment UCI and €5,000 for a multiple compartment UCI

SIF Law UCIs: fixed at €1,500 for a single compartment UCI and €2,650 for a multiple compartment UCI

StockExchangemaintenancefee(fixedasfollows)

1st quotation line €1,875

2nd quotation line €1,250

3rd quotation line €875

4th and subsequent quotation lines €500 per quotation line

Auditfee

Annualandsemi-annualreportsprintingcosts

Publicationinnewspapers

Annualsubscriptiontaxof0.05%ofnetassets(unlessreducedrateof0.01%applies–seeSection10.�.)

Custodian,administration,domiciliation

Management/advisoryfee

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13. Marketing

ThisChapteroutlinestherequirementsandprocedureformarketingthesharesofaLuxembourgUCITSinotherEUMemberStates,requirementsformarketingthesharesofaUCITSfromanotherEUMemberStateinLuxembourgandLuxembourgmarketingregulations.

Marketingofnon-UCITSfundsissubjecttoeachcountry’slocaldistributionrules.

TheUCITSDirectiveprovidesforaharmonized“EUpassport”forUCITSfunds–theideabeingthataUCITSfundauthorizedinoneMemberState(the“homeMemberState”)maybemarketedinanyotherMemberState(the“hostMemberState”)followingnotificationtothehostMemberStateauthorities.

UnderthenotificationprocedureforeseenintheUCITSDirective,certainproceduresmustbecompliedwithtoenablecross-bordermarketing:

13.1. A Luxembourg UCITS wishing to market its shares in other Member States must comply with the following procedures:

InformthesupervisoryauthoritiesofthehostMemberStatesinanotificationletter

SendthefollowingdocumentstothesupervisoryauthoritiesofthehostMemberStates:

AttestationletterfromtheCSSFthatitcomplieswithPartIofthe2002Law

Constitutionaldocuments(articlesofincorporationormanagementregulations)

Fullandsimplifiedprospectus

Latestannualandsubsequentsemi-annualreport,ifappropriate

DetailsofarrangementstomarketitssharesorunitsinthehostMemberState

ComplywiththeregulationsandadministrativeandmarketingprovisionsofthehostMemberStatewhicharenotcoveredbytheUCITSDirective.

Withtheexceptionoftheattestationletter,thedocumentsandinformationmustbeprovidedintheiroriginallanguageandinatleastoneofthelanguagesacceptedbythehostMemberState.ThehostMemberStatemayallowtheuseoflanguagewhichisnottheofficiallanguage.Theoriginalattestationletterand,ifrelevant,anEnglishversionshouldbeprovided.

TheUCITSmaybegintomarketitssharesinahostMemberStatetwomonthsaftertheabove-mentioneddocumentshavebeensubmittedtothesupervisoryauthorityofthehostMemberState,unlessitisadvisedtothecontrary.Detailsregardingtheimplementationofthenotificationprocedureareprovidedinsection1�.�.

Withaviewtofacilitatingtheimplementationofthenotificationprocedure,andfollowingCESR’sguidelines,theCSSFhasannouncedthefollowingmeasures:

AstandardmodelofthenotificationletterhasbeenmadeavailableonthewebsiteoftheCSSF.

AnattestationlettertomarketunitsofUCITSinanEEAMemberStatewillautomaticallybeprovidedbytheCSSFinEnglish,FrenchandGermanwhenaUCITSisincludedontheCSSFlistofapprovedUCITS.

Regardingprospectuses,threecopiesofboththesimplifiedandcompleteprospectusshouldbesubmittedtotheCSSFwiththeapplicationforapproval;onecopyofeachwillbereturnedwithavisa,whichtheUCITScancopy,certifyitself,andincludewithapplicationsformarketinginthehostMemberState.

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13.2. A UCITS situated in another Member State which wishes to market its shares in Luxembourg must comply with the following procedures:

InformtheCSSFinanotificationletter

SendthefollowingdocumentstotheCSSF:

Attestation letter from the supervisory authority in the home Member State that it fulfils the UCITS Directiverequirements

Constitutionaldocuments

Fullandsimplifiedprospectus

Latestannualandsubsequentsemi-annualreport,ifappropriate

DetailsofarrangementstomarketitssharesinLuxembourg

ComplywiththeregulationsandadministrativeandmarketingprovisionsofLuxembourgwhicharenotcoveredbytheUCITSDirective,including:

FillouttheformprovidingspecificinformationforthemarketinginLuxembourgofunits/sharesofaUCITSestablishedinanotherMemberStateoftheEuropeanUnion

Haveaprospectuswhich includes required additional information regarding thepayingagent,where subscription,redemptionandconversionrequestscanbemadeandwheretoobtaininformationtobemadeavailabletoinvestors

Draftpayingagencyagreement

AppointacreditinstitutiontoensurefacilitiesareavailableinLuxembourgforpayingshareholdersandrepurchasingshares

MakeavailableinLuxembourgthedocumentswhichitisobligedtopublishinitshomeMemberState.SuchdocumentsmustbeeitherinLuxembourgish,French,GermanorEnglish.

Theabove-mentioneddocumentsmustbesubmittedtotheCSSFinFrench,GermanorEnglish.

TheCSSFwill inform theUCITSwithinoneweek if theapplication is incomplete.Aftera furtherweek, theUCITSwillreceiveapprovalformarketinginLuxembourg.TheCSSFisthusgoingwellbeyondthepresentEUrequirements,describedinSection1�.�.

13.3. Clarification and Simplification of the Notification Procedure

DivergentimplementationsinsomeMemberStatesofthenotificationproceduresdescribedinSection1�.1.havegivenrisetosignificantgapsbetweenthe“idea”andthepractice,resultinginuncertainty,costsanddelays.ThiswasthesubjectofanInterpretativeCommunicationfromtheEuropeanCommissionandCESRGuidelines.

The European Commission issued, in March 2007, an Interpretative Communication clarifying the respective powers ofthehomeandhostMemberStateswhere aUCITS is tobemarketed in a hostMemberState.ThehomeMemberState’sresponsibilitiesundertheUCITSDirectiveconcernfundauthorization,fundstructure,managementandinvestmentpoliciesandcompulsoryinformationtobesuppliedtotheunitholders.ThehostMemberStateretainsitsresponsibilityoutsidethisfield,notablyregardingmarketingarrangements.

In an attempt to attain a consistent approach throughout the EU, CESR issued guidelines in June 2006 in relation to theimplementationofthenotificationrequirements.

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CESRmembersagreedthatahostMemberStatemaynotcallinquestionthejudgmentofthehomeMemberStateregardingthecomplianceofthefundwiththeUCITSDirective.AhostMemberStatemayonlyrefusethemarketinginitsterritoryofaUCITSauthorizedinitshomeMemberStateunderoneofthefollowingconditions:

Themarketingarrangementsfailtocomplywiththelaws,regulationsandadministrativeprovisionsinforceinthehostMemberState

NecessarymeasureshavenotbeentakentoensurethatfacilitiesareavailableinthehostMemberStatefortransactionsrelatingtofundunitsandmakingavailabletheinformationwhichUCITSareobligedtoprovide.

CESR is to develop a proposal for a “mediation mechanism” to resolve disputes between home and host Member StateauthoritiesregardingtheimplementationandapplicationoftheDirectiveandCESR’sguidelines.

Inrelationtotheprocedurestobeperformedaspartofthenotificationprocess,CESR’sguidelinescoverfourmainareas:

a) Two Month Period

Undertheguidelines,aUCITSmaybeginmarketinginthehostMemberStatefollowingthetwomonthwaitingperiodaftercompletionofthenotification,unlessthehostMemberStateauthorityinformstheUCITSbeforetheexpiryofthetwomonthperiodthat,initsview,themarketingarrangementsdonotcomplywiththeDirective.

CESRhasclarifiedthatthetwo-monthperiodbeginswhenthehostMemberStatehasreceivedthecompletenotification.Ifthenotificationisnotcomplete,thetwo-monthperioddoesnotbegin.

Ifthenotificationisincomplete,thehostMemberStateshallinformtheUCITSabouttheincompletenessandthemissinginformation anddocuments as soon as possible and in any casewithinonemonth from thedate of the receipt of theincompletenotification.

If the home Member State does not receive any communication from the host Member State within two months ofsubmittingthecompletenotification,theUCITSmaybegintomarketitssharesinthehostMemberStateuponexpiryofthetwomonthperiod.

b) Certification of Documents

UCITSmayprovidethehostMemberStatewithself-certifiedcopiesoforiginaldocumentsapprovedbyorfiledwiththehomeMemberStateauthority(togetherwithtranslations,ifrequired).ThecertificationmustcontainnarrativestatingthattheversionsofthedocumentsthathavebeenattachedtothenotificationletterarethelatestoneswhichhavebeenapprovedorfiledwiththehomeMemberState.ThecertificationmaybedonebytheUCITSorathirdpersonhavingwrittenauthoritytoactonbehalfoftheUCITS.

c) Translation of Documents

CESR’sguidelinesprovidethatforthenotificationprocedure,astandardizednotificationlettershouldbeusedandsubmittedinalanguage“commoninthesphereofinternationalfinanceorinthe,oroneofthe,officiallanguagesofthehostMemberStateifitisnotcontrarytothedomesticlegislationorregulationsofthehostMemberState”.ThehostMemberStatecanapprovetheuseofalanguageotherthantheofficiallanguage.TheoriginalUCITSattestationshouldincludeanEnglishversionprovidedbytheUCITSexceptwherethehomeMemberStateauthorityandthehostMemberStateauthorityhavethesameofficiallanguage(s).

Tofacilitatethisprocess,CESRmembershaveagreedtopublishinformationonthedocumentsthatmustbetranslatedandontheacceptedlanguagesontheirwebsites,andalsotofacilitateelectronicfilingofdocuments.

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d) Umbrella Funds

Inrelationtoumbrellafunds,onlythosesub-fundsproposedtobemarketedinthehostMemberStatehavetobenotified.Newmultiplesub-fundswhichareaddedtoanumbrellafundmaybeincludedinonesinglenotificationandthetwomonthperiodshouldapply.SomehostMemberStatesdonotconsideritnecessarytoapplythetwomonthperiodinthislattercase.TofacilitatethetransparencyoftherequirementstotheUCITS,thejurisdictionsthatwillapplythetwomonthperiodshouldindicatetherequirementontheirwebsitesamongtherequirementsonnationalmarketingrules.

Inaddition,inordertosimplifytheprocessingbythehostMemberStateofthenotificationofumbrellafundswithalargenumberofsub-funds,CESRrecommendshavingonefullprospectus.If theUCITSprovidesaseparatefullprospectusfor each sub-fund, the UCITS’ authorized directors or a third person having written authority to act on behalf of theUCITSmustself-certifythattheinformationonthemarketingarrangementsinthehostMemberStatearethesameineachprospectusorindicatewhytheyaredifferent.

13.4. Marketing Regulations in Luxembourg

ThemarketinglawswhichUCIsmustcomplywithinLuxembourgareasfollows:

Lawof�0July2002asamendedregulatingcertaintradepractices,penalizingunfaircompetitionandtransposingDirective97/55/ECoftheEuropeanParliamentandoftheCouncilamendingDirective84/450/EECconcerningmisleadingadvertisingsoastoincludecomparativeadvertising

TheLawof25August198�onconsumerprotection

TheLawof16July1987ondoor-to-doorselling,itineranttrade,displayofgoodsandsolicitingoforders.

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14. Management Companies

14.1. Introduction

The2002Lawdistinguishesbetweentwocategoriesofmanagementcompanies:

a) ManagementcompanieswhichcanmanageUCITSandotherUCIs.SuchmanagementcompaniesalsohaveaEuropeanpassport.ThesemanagementcompaniescomeunderChapter1�ofthe2002Law.

b) Allothermanagementcompanies.Thesemanagementcompanies,whichdonothaveaEuropeanpassport,comeunderChapter14ofthe2002Law.

The2002LawintroducedtherequirementofaUCITSinvestmentcompany(SICAV/SICAF)subjecttothe2002Lawtoappointeitheranapprovedmanagementcompany,or,designateitselfasaself-managedinvestmentcompany(seeSection1.�.1.).

14.2. Management Companies with European Passport

ManagementcompanieswithEuropeanpassport(“Chapter1�managementcompanies”)canmanageUCITSandotherUCIs.TheymustcomplywiththeprovisionsofChapter1�ofthe2002LawandalsoCircular0�/108whichwasissuedon�0July200�.ThisCirculardetailsthemannerinwhichcertainarticlesofChapter1�aretobeappliedinpracticeandalsospecifiesthefinancialinformationwhichChapter1�managementcompaniesandself-managedinvestmentcompaniesarerequiredtoreporttotheCSSF.

TheimplementationoftheMiFIDDirectivesinLuxembourglegislationinJuly2007hasinvolved,inter alia,amendmentstothe199�LawanditscompletionwithaGrand-DucalRegulationontheorganizationalrequirementsandoperatingconditionsfor investment firms. This implies modified and additional requirements for Chapter 1� management companies offeringadditionalservices(seePermittedActivities-(6)below).

Therulesapplicablearesummarizedasfollows:

Referencetoarticleinthe2002LaworCirculars0�/108&05/185

Authorization

(1) Prior authorization from the CSSF must be obtained before commencing business.ThesameappliestotheopeningofbranchoperationsinLuxembourgorabroad.Anauthorizedmanagementcompanywishing tocarryonbusiness inanotherMemberStatemustalsonotifytheCSSF.

77(1)&78(4)0�/108-I.1.

(2) SuchauthorizationisvalidforallMemberStatesoftheEU. 77(1)&78(4)0�/108-I.1.

(�) ManagementcompaniesauthorizedinanotherMemberStatemaycarryoutitsactivityinLuxembourg.Theestablishmentofabranchdoesnotrequireauthorization.

87(1)&(2)

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Referencetoarticleinthe2002LaworCirculars0�/108&05/185

Legal Form

(4) Theymaybesetupunderanyofthefollowingforms:

Publiclimitedcompany(société anonyme–S.A.)

Privatelimitedcompany(société à responsabilité limitée–S.àr.l.)

Cooperativecompany(société cooperative)

Cooperative company organized as a public limited company (société coopérative organisée sous forme de société anonyme)

Partnershiplimitedbyshares(société en commandite par actions)

Thecapitalshallberepresentedbyregisteredshares.

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77(1)

Permitted Activities

(5) MayonlymanageUCITSwhichareunderthe2002LawandotherUCIsforwhichitissubjecttosupervision.Themanagementactivityincludesthefollowingfunctions,aslistedinAnnexIItothe2002Law:

Investmentmanagement

Administration

Legalandfundmanagementaccountingservices

Customerinquiries

Valuationandpricing(includingtaxreturns)

Regulatorycompliancemonitoring

Maintenanceofunit-holderregister

Distributionofincome-unitissuesandredemptions

Contractsettlements(includingcertificatedispatch)

Registrationandpreservationofoperations

Marketing

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(6) Asaderogationto(5),theymayalsoprovidethefollowingservices:

a) Managementofportfoliosofinvestments,includingthoseownedbypensionfunds,onadiscretionaryclient-by-clientbasis,wheresuchportfoliosincludeoneormoreoftheinstrumentslistedinSectionBofAnnexIItothe199�LawontheFinancialSector(i.e.:securities;holdingsinUCIs;monetaryinstruments;futures;forwardrateagreements;swapsoninterestrates,currencies,orequity/index-relatedswaps;optionstobuyorsellapermittedinstrument)

b) Asnon-coreservices:

investmentadviceconcerningoneormoreoftheinstrumentslistedinSectionBofAnnexIItothe199�LawsafekeepingandadministrationinrelationtounitsofUCIs.

Theywillnot,however,beauthorizedtoprovideonlytheservicesina)andb),ortoprovidenon-coreservicesinb)withoutbeingauthorizedfortheserviceina).

Managementcompaniesauthorizedtoprovidediscretionaryportfoliomanagementservicesmaynotinvesttheinvestor’sportfolioinunitsofUCIsitmanageswithoutpriorgeneralapprovaloftheclient.

For thepurposesof theabove, ‘investmentadvice’consistsof theprovisionofpersonalrecommendations toaclient, eitheron the initiativeof theclientor the initiativeof themanagement company, concerning one or more transactions relating to the instrumentslistedinSectionBofAnnexIItothe199�Law.

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Referencetoarticleinthe2002LaworCirculars0�/108&05/185

Apersonalrecommendationisarecommendationthatismadetoapersoninhiscapacityasaninvestororpotentialinvestor,orinhiscapacityasanagentforaninvestororpotentialinvestor.

Thatrecommendationmustbepresentedassuitableforthatperson,ormustbebasedonaconsiderationofthecircumstancesofthatperson,andmustconstitutearecommendationofanoperationofoneofthefollowingcategories:

(a) tobuy,sell,subscribefor,exchange,redeem,holdorunderwriteaparticularfinancialinstrument;

(b) toexerciseornottoexerciseanyrightconferredbyaparticularfinancialinstrumenttobuy,sell,subscribefor,exchange,orredeemafinancialinstrument.

A recommendation isnotapersonal recommendation if it is issuedexclusively throughdistributionchannelsortothepublic.

Capital Requirements

(7) Minimumcapitalrequirementsare: 78(1)a)

Initialcapital:

When value of portfolios exceeds €250 million

€125,000

Additionalcapitalof0.02%oftheamountofthe portfolios which exceeds €250 million.

Maximumtotalrequiredcapital,however,is€10 million.

Up to 50% of the additional capital maybeprovidedbymeansofaguaranteegivenby a credit institution or an insuranceundertaking.

0�/108-I.6

Forcapitalrequirementspurposes,portfoliosaredeemedtobe:

FCPs including portfolios for which it has delegated the management function, butexcludingportfoliosthatitismanagingunderdelegation

SICAVsorSICAFswhere themanagementcompany is thedesignatedmanagementcompany

OtherUCIsincludingportfoliosforwhichithasdelegatedthemanagementfunction,butexcludingportfoliosthatitismanagingunderdelegation.

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Where a management company is also engaged in the management of portfolios ofinvestments (see Permitted Activities - (6)a) above), it must furthermore respect theLuxembourgregulationsimplementingDirective2006/49/EConthecapitaladequacyofinvestmentfirmsandcreditinstitutions.However,ifitonlyprovidesnon-coreservices(seePermittedActivities-(6)b)above),itwillnotbesubjecttocapitaladequacyrequirements.

77(4)

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Referencetoarticleinthe2002LaworCirculars0�/108&05/185

Management

(8) The persons who effectively conduct the business of the management company(management) must be of sufficiently good repute and be sufficiently experienced.ThenamesofthesepersonsandofeverypersonsucceedingthemmustbecommunicatedtotheCSSF.Theconductofthebusinessmustbedecidedbyatleasttwopersonsmeetingsuchconditions.TheCSSFmustbeabletocontactsuchpersonsdirectlyandinprinciple(seecommentsonCircular05/185below)oneofthesepersonsmustbebasedinLuxembourg.

Circular 05/185 issued on 24 May 2005 amends Circular 200�/108 in that the CSSF may alsoCircular05/185issuedon24May2005amendsCircular200�/108inthattheCSSFmayalsoauthorizeamanagementcompanysubjecttoChapter1�oftheamended2002Lawwhenparticularelementsof theapplicationallow theCSSF toconclude that themanagementcompany does not only have its registered or statutory office in Luxembourg. Theseelementsmaybenumerousandshould,interalia,beinspiredbyaconcernforcompliancewithcorporategovernanceandriskmanagementcontrols.Luxembourgresidentdirectors,boardmeetingsheldinLuxembourgortheperformanceofcertainactivitiesinLuxembourgareexamplesofsuchelementswhich,individuallyarenotnecessarilysufficientor,inthepresenceofotherelements,notnecessarilyrequired.EachfilewillbeconsideredbytheCSSFonacase-by-casebasis. Inall cases themanagersmusthaveat theirdisposalalltechnicalandITequipmentnecessarytoenablethemtoassumealltheresponsibilitiesandtoperformthefunctionswhichareimposedonthembythe2002Law.

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05/185

(9) Consistentwiththeprincipleofindependencebetweenthemanagementcompanyandthecustodian, it isnotappropriate forsuchmanagers tobeemployedby thecustodianofaUCITSundertheirmanagement.

0�/108-I.�.a)

Business Plan

(10) Theapplicationmustbeaccompaniedbyabusinessplan(programofactivity)settingout,inter alia:

(i) Theorganizationalstructureofthemanagementcompany

(ii) Thescopeofservicesplannedforthenextthreeyearsasregardscollectiveportfoliomanagement(numberofUCITSmanageddirectlyanddelegated,thelawunderwhichtheUCITSinquestionwereformed,theirnetassetsaswellasthenumberandnetassetsofUCITS,manageddirectlyandbydelegation,formedontheinitiativeofacompanynotbelongingtothesamegroupasthemanagementcompany)

(iii) TheinvestmentpoliciesoftheUCITSundermanagement,togetherwiththefinancialinstrumentsandmarketsconcerned

(iv) Therisk-managementprocess(Article42(1)–seeSection2.2.1.(6)).

78(1)c)

0�/108-I.2.

(11) Managementcompaniesengagedinbothcollectiveanddiscretionaryportfoliomanagement(see(6))shallalsoincludethefollowinginformationinthescopeofservicesplannedforthenextthreeyears(referredtoin(10)(b)):

Managementof investmentportfoliosonaclient-by-clientbasis (numberofprivate,institutional and pension fund clients and assets under management for each clienttype)

Whereapplicable,anynon-coreservicestobeoffered

Inaddition,wheresuchservicesfallwithinthescopeofprivateportfoliomanagers(gérants de fortunes)underthe199�Law,thoseruleswillapply(e.g.twomanagersmustbebasedinLuxembourg).

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Referencetoarticleinthe2002LaworCirculars0�/108&05/185

Head office and Registered Office

(12) BoththeheadofficeandregisteredofficemustbeinLuxembourg. 78(1)d)

Effective Supervision

(1�) Whereclose linksexistbetween themanagementcompanyandotherparties, theCSSFwill only grant authorization if such links do not prevent the effective exercise of itssupervisoryfunctions.Norwillauthorizationbegrantediftheregulationsofanon-MemberStategoverningsuchlinkedpartiespreventeffectiveexerciseoftheCSSF’ssupervisoryfunctions.

78(2)

Identity of Shareholders or Members

(14) TheCSSFmustbeinformedoftheidentityoftheshareholdersormembers,whetherdirectorindirect,naturalorlegalpersons,thathavequalifyingholdingsandtheamountsofthoseholdings.TheCSSFwillneedtobesatisfiedastothesuitabilityofsuchshareholdersormembers.Qualifyingholdingsaredeemedtobeholdingsof10%ormore,whetherdirectorindirect,orwhereitispossibletoexercisesignificantinfluence.TheCSSFmustbenotifiedimmediatelyofanychanges.

79(1)0�/108-I.4.

Consultation with other Member States

(15) TheauthoritiesofotherMemberStateswillbeconsultedpriortoauthorizationwherethemanagementcompanyis:

AsubsidiaryofanentityauthorizedinanotherMemberState

AsubsidiaryoftheparentundertakingofanotherentityauthorizedinanotherMemberState

Controlledbythesamepersons/entitywhichcontrolotherentitiesauthorizedinanotherMemberState

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Audit

(16) Itsannualaccountsmustbeauditedbyanindependentauditor. 800�/108-I.7.

Central Administration in Luxembourg

(17) The central administration of a management company must be located in Luxembourg.Thisconceptshouldbe takenin thebroadestsenseandincludes, inter alia, theareasofinfrastructureandaccountingandinformationsystems.

0�/108-I.�.

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Referencetoarticleinthe2002LaworCirculars0�/108&05/185

Human Resources

(18) Thepersonnelmustbepermanentandappropriatelyqualified. 0�/108-I.�.a)

(19) TheCSSFmay,however,grantaderogationfromthispointandallowsomeorallofthepersonnel tobe secondedor temporarilyassigned fromanentitybelonging to the samegrouporfromathirdpartyentity.Insuchcases,theagreementcoveringsucharrangementmustbesubmittedtotheCSSF.Inadditionthisagreementmustdealwiththeconflictsofinterestbetweenthepersonnelconcernedandtheentity,ifitbelongstothesamegroup.

0�/108-I.�.a)

Administrative and Accounting Procedures and Technical Resources

(20) TheCSSFmustreceiveadescriptionofcomputerhardware,softwareanddatasourcesinuse.

0�/108-I.�.b)

(21) HavingregardtothenatureoftheUCITSmanagedbyamanagementcompanyitmustbeabletodemonstratethatit:

Has sound administrative and accounting procedures, control and safeguardarrangementsforelectronicdataprocessingandadequateinternalcontrolmechanisms

IsstructuredandorganizedinsuchawayastominimizetheriskofUCITS’orclients’interestsbeingprejudicedbyconflictsofinterestbetweenthemanagementcompanyanditsclients,betweenoneofitsclientsandanother,betweenoneofitsclientsandaUCITSorbetweentwoUCITS

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Delegation of Functions

(22) Management companies may delegate their own functions. The delegation in no wayaffects the responsibilitiesof themanagementcompanyor thecustodian.The followingpreconditionsmustbecompliedwith:

General

ThemanagementcompanymustinformtheCSSFandsubmit,foreachUCITSitmanages,adetaileddescriptionofthedutiesitisproposingtodelegate,theentitiestowhichthedutiesaretobedelegatedandtheproceduresinplacetomonitortheactivitiesofthemandatedentities.

Themandatemustnotpreventeffectivesupervisionoverthemanagementcompanyorpreventitfromacting,ortheUCITSfrombeingmanaged,inthebestinterestsofitsinvestors.

Measuresmust existwhichenablemanagementof themanagementcompany tomonitoreffectivelyatanytimetheactivityofthemandatedentity.Thisrequirestheimplementationofamonitoringinfrastructurewhichallowsmanagementaccesstodataevidencingtheworkperformedonbehalfof themanagementcompanyandtheUCITSunderitsdelegatedmanagement.Managementshallreceiveregularly,inrespectofeachUCITSunderitsdelegatedmanagement,detailedreportswhichenableittodeterminewhether,inparticular:

theassetsoftheUCITSareinvestedinaccordancewiththerules

riskmanagementtechniquesareinplaceandarebeingappliedsothatpositionrisksandtheirindividualimpactontheoverallriskprofileoftheUCITScanbemonitoredandmeasuredatalltimes

themarketingpolicyoftheUCITSisbeingfollowed

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Referencetoarticleinthe2002LaworCirculars0�/108&05/185

Managementmustbeabletoaccess,whetheron-lineorbyrequest,theaccountingdatafortheUCITS.

The mandate shall not preventmanagement from issuing at any time additionalinstructionsorwithdrawingthemandatewithimmediateeffectwhenthisisintheinterestofinvestors.

Themandatedentitymustbequalifiedandcapableofundertakingthedelegatedfunctions.Itmustalsobeabletoproduceevidencethatithastheappropriatehumanandtechnicalresources.

TheUCITS’prospectusesshalllistthefunctionswhichthemanagementcompanyhasbeenpermittedtodelegate.

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Specifictotheinvestmentmanagementfunction

Wherethedelegationconcernsinvestmentmanagement,themandatemayonlybegiventoauthorizedandsupervisedundertakings.

The identity of entities to which the investment management function hasbeen delegated must in principle be disclosed in the prospectus of the UCITSconcerned.

Thetermsofthedelegationofdutiesmustcomplywiththeinvestmentallocationcriteriasetfromtimetotimebythemanagementcompany.Asaresult,thetermsofthemandatewillincludetheinvestmentpolicyandlimitsinforcefortheUCITS(and sub-funds). These provisions may be incorporated within the mandate bymeansofacross-referencetotherelevantsectionoftheprospectus.

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Where the investment management related mandate is given to a third-countryundertaking,theremustbeappropriatecooperationarrangementsinplacebetweentheCSSFandthesupervisoryauthorityofsuchcountry.

Amandatewithregardtothecorefunctionofinvestmentmanagementmaynotbegiventothecustodianbankortoanyotherundertakingwhichmayhaveinterestswhich conflict with those of the management company or the investors. Thisprovisionshallnotprohibitthedelegationofaninvestmentmanagementmandatetoacompanybelongingtothesamegroupasthecustodian.Insuchcircumstances,the CSSF will only authorize the delegation of duties where it has evidence ofthe safeguards for protecting the interests of the management company and theinvestors.

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Rules of Conduct and Organizational Requirements

(2�) Theymustatalltimes:

acthonestlyandfairlyinthebestinterestsofitsclients

actwithdueskill,careanddiligenceinthebestinterestsofitsclients

haveandemployeffectivelythenecessaryresourcesandprocedures

trytoavoidconflictsofinterestandwheretheycannotbeavoided,ensureitsclientsarefairlytreated

comply with all regulatory requirements so as to promote the best interests of itsclients.

Theprovisionofmanagementofportfoliosofinvestmentsservicesandnon-coreservicesbymanagementcompanies(seePermittedActivities-(6)above)isalsosubjectto:

TheconductofbusinessobligationswhenprovidinginvestmentservicestoclientsofArticle�7-�ofthe199�Law

TheorganizationalrequirementsofArticle�7-1ofthe199�Law.

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TheprovisionofsuchservicesisalsosubjecttomostoftheimplementingmeasureslaiddownintheGrand-DucalRegulationof1�July2007ontheorganizationalrequirementsandoperatingconditionsforinvestmentfirmsandtherelevantMiFIDrulesofconductinthefinancialsectorlaiddowninCSSFCircular07/�07.

Financial Information Reporting to the CSSF on a Quarterly Basis

(24) InaccordancewithCircular0�/108of�0July200�,financialinformationhastobesentto theCSSFonaquarterlybasis.The report formatsare includedasappendices to thisCircular.Reportsaretobesubmittedforthefirsttimeasat�1December200�andaretobereceivedbytheCSSFbythe20thofthefollowingmonth.

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14.3. Other (Chapter 14) Management Companies of Luxembourg UCIs

Therulesapplicablearesummarizedasfollows:

Referencetoarticleinthe2002Law

Authorization

(1) PriorauthorizationfromtheCSSFmustbeobtainedbeforecommencingbusiness. 91(1)&(4)

Legal form 91(1)

(2) Itmaybesetupaseithera

Publiclimitedcompany(société anonyme –S.A.)

Privatelimitedcompany(société à responsabilité limitée–S.àr.l.)

Cooperativecompany(société cooperative)

Cooperative company organized as a public limited company (société coopérative organisée sous forme de société anonyme)

Partnershiplimitedbyshares(société en commandite par actions)

Thecapitalshallberepresentedbyregisteredshares.

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Permitted Activities

(�) MayonlymanageUCIs,theadministrationofitsownassetsbeingonlyanancillaryactivity,providedthatitmustmanageatleastoneUCIregulatedbyLuxembourglaw.ItmaynotusetheassetsoftheUCIsitmanagesforitsownneeds.

91(1)

Central Administration and Registered Office

(4) BothitscentraladministrationandregisteredofficemustbeinLuxembourg. 91(1)

Capital

(5) Must have adequate capital and a minimum of €125,000. 91(2)a)

Management

(6) Thepersonswhoeffectivelyconductthebusinessmustprovetheirgoodreputeandrequiredprofessionalexperience.

91(2)b)

Identity of Shareholders or Members

(7) NamesofshareholdersormembersmustbecommunicatedtotheCSSF. 91(2)c)

Organizational Structure

(8) Theapplicationforauthorizationmustsetouttheorganizationalstructure. 91(2)d)

Audit

(9) Itsannualaccountsmustbeauditedbyanindependentauditor. 92

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14.4. Taxation of management companies

a) Introduction

ManagementcompaniesaresubjecttonormalcommercialcompanytaxesinLuxembourg,withtheexceptionofmanagementcompaniesofasingleFCP,whichdonotpaytax.

Advisorycompaniesarealsocoveredinthissection.Anadvisorycompanymaybenefitfromtheprivileged1929HoldingCompany tax status1� (Advisory 1929 holding companies), provided it advises one UCI only. Such advisory holdingSuch advisory holdingcompanies require a minimum capital of €75,000 and must invest at least 5% of their capital, with a minimum of €50,000, inthesharesoftheUCIwhichtheyadvise.

Thetaxationofthese�typesofcompanyisdiscussedbelow.

b) Capital duty on incorporation

(i) General

Thecapitalcontributiondutyrateisfixedat1%ofpaid-upcapitalandsharepremium.Theconcentrationofcapitalincommercialandnon-commercialundertakings(sociétésciviles)givesrisetoacapitalcontributionduty.Thecapitaldutyispaiduponincorporationandsubsequentcapitalincreases.

(ii) Management companies of a single FCP

Management companies of a single FCP are subject, together with the FCP, to a fixed capital duty amounting to €1,250 irrespectiveoftheamountcontributed.

Althoughthecapitaldutyispayablebythemanagementcompany,itmaybechargedtotheFCP;andthisisthenormalpractice.

(iii) Advisory 1929 holding companies

Advisory1929holdingcompaniesaresubjecttocapitaldutyatarateof1%,asdescribedabove.

c) Annual taxationAnnual taxation taxation

(i) General

Commercialcompaniesaresubjecttoincometaxatarateof29.6�%aswellastoLuxembourgnetworthtaxatarateof0.5%(thisnetworthtaxcanhoweverundercertainconditionsbecreditedagainstthecorporatetax).

(ii) Management companies of a single FCP

Duetotheirprivilegedtaxstatus,managementcompaniesofasingleFCPareexemptfromanytaxes,beitincometaxes,capitaltaxesornetworthtaxes.

(iii) Advisory 1929 holding companies

Advisory 1929 holding companies of one single UCI are exempt from any income taxes. However, an annualsubscriptiontaxof0.2%ispayableonthevalueoftheirshares.Inpractice,suchataxappliestothepaid-upcapitalandtothesharepremium.

Wherethedividendsdistributedexceed10%ofthepaid-upcapitalandthesharepremium,however,thesubscriptiontaxforthedistributingyearwillamountto0.2%of10timesthedividendpaid.

�3 The law of 2� June 2005 amended the Luxembourg �929 Holding Company (H29) taxation scheme with effect from � July 2005. The new provisions exclude from the benefit of the H29 regime any holding company that receives at least 5% of its dividends from a foreign company that is not fully subject to tax corresponding to Luxembourg corporate income tax. However, note that H29s existing before � July 2005 benefit from a grandfathering clause until � January 20��.Following the investigation for illegal state aid by the European Commission, Luxembourg withdrew the H29 Regime. A transitional period is available until the end of 20�0.A law approved by the Luxembourg Parliament on the �3 December 2006, prohibits, with specific exceptions, the transfer of shares in existing H29s during the transitional period.

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d) Dividends and interestand interest interest

(i) General

Forcommercialcompanies,withholdingtaxondividendsamountsto15%,althoughthisratemaybereducedaccordingtodoubletaxtreatiesorinaccordancewiththeEUParent-SubsidiaryDirective.

Managementoradvisorycompaniesaresubjecttothenormalauthorizationproceduresforpayinginterimdividendsandarealsorequiredtocreatealegalreserve.Theinterimdividendauthorizationproceduresincludespecificauthorizationinthearticlesofassociationandthepreparationofinterimfinancialstatements,underthecontroloftheauditor.Thelegalreserverequirementis5%ofnetprofituntiltheaccumulatedreserveequals10%ofsubscribedcapital.

(ii) Management companies of a single FCP

ManagementcompaniesofasingleFCPareexemptfromwithholdingtaxondividendsdistributed.

(iii) Advisory 1929 holding companies

Advisory1929holdingcompaniesareexemptfromwithholdingtaxondividendspaid.However,asstatedin14.4.c)(iii)above,wherethedividendsdistributedexceed10%ofthepaid-upcapitalandthesharepremium,thesubscriptiontaxforthedistributingyearwillamountto0.2%of10timesthedividendpaid.

e) Tax on dissolution

(i) General

Liquidation proceeds distributed by normal taxable companies are not subject to withholding tax in Luxembourg.Nevertheless,theliquidationtriggerstherealizationofalltheassetsofthecompany;consequentlytheliquidationprofitwillincludeallunrealizedcapitalgainsandwillbesubjecttocorporateincometax.

(ii) Management companies of a single FCP

LiquidationproceedsofmanagementcompaniesofsingleFCPsarenotsubjecttowithholdingtax.Liquidationimpactsneitherincometax,norcapitaltaxnornetworthtax.

(iii) Advisory 1929 holding companies

Liquidationproceedsofadvisory1929holdingcompaniesarenotsubject towithholding tax.However, theannualsubscriptiontaxwillbedueinproportiontothedurationindayspassedbetweenthebeginningofthelastaccountingyearandthedateoftheliquidationofthecompany.

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15. Current and Future Developments in Investment Fund Legislation

ThischapteroutlinesregulatorydevelopmentsoverthelastyearrelevanttoLuxembourginvestmentfunds,expectedfutureregulatorydevelopmentsinLuxembourg,clarificationsregardingeligibleassetsyettobeimplemented,andtheproposalsforupdatingoftheUCITSregimeatEUlevel.

15.1. Recent Developments

ThefollowingarerecentdevelopmentsinEuropeanandLuxembourginvestmentfundrelatedlegislation:

Eligible Assets

Tofurtherclarify thedefinitionofeligible investments (“eligibleassets”) foraUCITS incompliancewith theUCITSDirectives,toensureconsistentinterpretationandimplementationoftheUCITSDirectivesacrossallEUMemberStates,andfurthertoCESR’sadviceof26January2006,theEuropeanCommissionissuedaDirectiveon19March2007clarifyingcertaindefinitionsconcerningeligibleassetsofUCITS.MemberStateshaveuntil2�March2008toadoptandpublishthelaws,regulationsandadministrativeprovisionsnecessarytocomplywiththeDirective.MemberStatesmustapplytheseprovisionsfrom2�July2008.CESRissuedguidelinesinMarch2007tocomplementthisDirective.DetailscanbefoundinSection15.�.

UCITS risk management method and the use of derivative instruments

Circular07/�08of2August2007providesguidelinesconcerningtheuseofariskmanagementmethod,aswellastheuseofderivative instruments forUCITS. It outlines the implementationof a riskmanagementprocess, the risk limitsapplicable,theuseoffinancialderivativeinstrumentsandinformationtobecommunicatedtotheCSSF.ItreplacesCircular05/176.DetailscanbefoundinSection2.2.2.

Respective powers of home and host Member States

TheEuropeanCommissionissuedanInterpretativeCommunicationclarifyingtherespectivepowersofthehomeandhostMemberStateswhereaUCITSistobemarketedinahostMemberStateinMarch2007.Forfurtherinformation,pleaseseeSection1�.�.

The SIF Law

TheSpecializedInvestmentFundLawof1�February2007(theSIFLaw)coversinvestmentfundstobedistributedto“informedinvestors”.TheSIFLawsignificantlysimplifiestherulesforsettingupfundstructuressuchashedgefunds,realestatefundsandprivateequityfunds,greatlyenhancingLuxembourgasa“domicileofchoice”forsuchproducts.Thenewlawreplacedthe1991Law.Itprovidescontinuityfor1991Lawfundsby,forexample,continuingtoimplementpreviouslyavailablefundstructuresandnotaddinganyadditionalrestrictions.

TheSIFLawiscoveredinparticularinChapters1and4andSections�.1.,7.2.and8.2.

TheCSSFhasissuedthefollowingCircularsclarifyingtheSIFLaw:

Riskspreadinginthecontextofspecializedinvestmentfunds

CSSF Circular 07/�09 on risk spreading in the context of specialized investment funds, dated � August 2007,complementedtheSIFLawandprovidedclarificationontheinvestmentrestrictionsthatmustbeadheredtoinordertoensureadequateriskdiversification.DetailscanbefoundinSection�.1.

FinancialinformationtobeprovidedtotheCSSFbyspecializedinvestmentfunds

Inasimilarmanner to fundsunder the2002Law,SIFsare required tosubmit,electronicallyviaCCLux,monthlyandannualinformationtotheCSSF,forstatisticalandsupervisorypurposes.Thecontentsofthemonthlyandannualfinancialinformation,aswelltherelatedrules,aresetoutintheCircular07/�10.DetailscanbefoundinSections8.1.4.and8.2.

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Anti-money laundering and terrorist financing

NewprofessionalPractices and Recommendations aimed at reducing the risk of money laundering and terrorist financing in the Luxembourg Fund IndustrywerepublishedinDecember2006.Formoreinformation,seeSection5.�.e).

On6March2007,theFinancialIntelligenceUnit(Cellule de Renseignement Financier-CRF)oftheLuxembourgStateProsecutor issuedCircular04/07.TheCircular is addressed toprofessionalswhoare subject to the legalobligation toinformtheLuxembourgStateProsecutorwhenconfrontedwithasuspicioussituationorperson,asrequiredbyArticle5(1)oftheLawof12November2004oncombatingmoneylaunderingandthefinancingofterrorism.TheCircularprovidesastandardtemplatetobeusedforcommunicatingwiththeStateProsecutor.

FollowingonfromtheFirstandSecondAnti-MoneyLaunderingDirectives,inordertoupdateEuropeanlegislation,bringitinlinewithinternationalrecommendations,andtoensuretheircoherentapplicationinMemberStates,theEUadoptedtheThird Anti-Money Laundering Directivein2005(2005/60/ECof26October2005).

ThisnewDirectivewidensthescope,updatestheregulatoryapproachandforthefirsttime,makesspecificreferencetofinancingofterrorismandassociatesmeasuresregardingthefightagainstterrorismwiththeenlargedmoneylaunderingprovisions.Thiswasadirect consequenceof theadoptionof the8+1RecommendationsonTerroristFinancing in thewakeof11September2001terroristattacksontheUnitedStatesandthesubsequentcrackdownoninternationalterroristnetworks.

Inparticular, theThirdDirective, and the implementingmeasures subsequentlyadoptedby theEuropeanCommission(Directive2006/70/ECof1August2006):

Significantlybroadensthedefinitionoftheoffenceofmoneylaundering,withamuchlongerlistofpredicateoffences:offencesnowincludecriminaloffencespunishablebyatermofimprisonmentinexcessofoneyear

Extendstherangeofprofessionalssubjecttoanti-moneylaunderingrequirementstolawyers,notaries,accountants,realestateagents,casinooperatorsandtrustandcompanyserviceproviders

Definestheconceptsof“politicallyexposedpersons”,their“immediatefamilymembers”and“personsknowntobecloseassociates”.Regarding“politicallyexposedpersons”,thedefinitionprovidedissimilartotheexamplesprovidedintheLuxembourgcombinedtextonanti-moneylaunderingandthepreventionofterroristfinancing,CSSFCircular2005/211

Clarifiescriteriafortheapplicationof“simplifiedcustomerduediligence”andthemeaningof“financialactivityonanoccasionalorverylimitedbasis”.Thelattersetsthemaximumamountforasingletransaction,orseriesoftransactionswhich appear to be linked, at less than €1,000; the present legal limit in Luxembourg is €15,000.

MemberStateshaveuntil15December2007tobringintoforcethenational legislationrequiredtocomplywiththeseDirectives.

Distance marketing of consumer financial services

Thelawof18December2006onthedistancemarketingofconsumerfinancialservicestransposesEUDirective2002/65/EC.ThekeyelementsareoutlinedinCSSFCircular07/281of27February2007.

Thefinallawcoversalltypesofdistancecommunicationsuchaspost,fax,telephoneandelectronicmeans.Itsetsouttheinformationtobeprovidedbytheprofessionaltotheconsumerbeforeanofferismadeoracontractisconcluded,aswellasanywithdrawalperiod,whereapplicable.

Ifthecontractisconcludedelectronically,theprovisionsofthemodifiedlawof14August2000relatingtoe-commercealsoapply.

Introduction of European Company and modernization of company law

On25August2006,LuxembourgimplementedCouncilRegulation(EC)2157/2001ontheStatuteforaEuropeanCompanyintolaw.ThislawintroducestheconceptoftheEuropeanCompany(Societas Europaea-SE)andmodernizesthe1915Law.

Thenewlawallows,forthefirsttime,thecross-bordermergeroftwoormoreSICAVsestablishedinatleasttwoMemberStatesviaincorporationasanSE.Italsoamendsthe2002LawtopermitSICAVstobeincorporatedasSEs.Nosimilarprovisionisavailable,however,forFCPs.

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(i) Two-tier structure of governance - the new law introduces the option of implementing the two-tier structure of amanagementboardandsupervisoryboard;previously,theonlygovernancestructureavailablewasasingleboardofdirectors.Untilnow,theboardsofdirectorsofbothSICAVandFCPmanagementcompanieshavetypicallycarriedoutasupervisoryfunction;theyhavecomprisedrepresentativesfromthepromoter.

(ii)Single-shareholderS.A.s-thenewlawintroducesthepossibilitytocreateasingle-shareholderSA,whilepreviouslyaminimumoftwoshareholderswasrequired.AsaLuxembourgmanagementcompanyisusuallywhollyownedbythepromoter,theavailabilityofsingle-shareholderSAwillfacilitatetheirincorporation.Inaddition,itallowsSICAVstobecreatedforasingleinvestor.

(iii)Shareholders’meetings–thenewlawprovidesthatthatthestatutoryauditoraswellas,underatwo-tierstructure,themanagementboardand thesupervisoryboardmay requesta shareholders’meeting.Secondly, shareholdersarepermittedtoparticipateinmeetingsotherthaninperson,e.g.viavideoconferenceorvotepriortothemeeting.Thirdly,thenewlawfacilitatesthedecision-makingbyshareholdersbyexcludingabstentionsandnilvotesinthecomputationofthetwo-thirdsmajorityrequiredtocarryadecision.Lastly,thenewlawpermitsinitialfinancialperiodsexceeding12months,providingthattheannualgeneralmeetingofshareholderstoapprovetheaccountsisheldwithin18monthsofthedateofincorporationofthecompany.

(iv)Compositionoftheboard-thenewlawallowsalegalentitytoactasamemberofthesupervisoryormanagementboard,providingthatthelegalentityappointsaphysicalpersonasitspermanentrepresentative.

MiFID

TheLawof1�July2007onmarketsinfinancialinstrumentstransposesthe“Level1”MiFIDDirective(2004/�9/EC).Italsomodifies,inter alia,the199�Lawandthe2002Law.AGrand-DucalRegulationof1�July2007transposesthe“Level2”MiFIDDirective(2006/7�/EC).ClarificationregardingcertainprovisionsoftheLawandGrand-DucalRegulationisprovidedinCSSFCircular07/�07of�1July2007onMiFID: Rules of conduct in the financial sector.

The implementation of the MiFID Directives in Luxembourg legislation implies, inter alia, modified and additionalrequirementsforChapter1�managementcompaniesofferingadditionalservices.

FurtherguidanceoncertainaspectsofMiFIDrelevanttothefundindustrycanbefoundintheCESRRecommendationsonInducements under MiFIDandThe passport under MiFID.

ALFI report on swing pricing

InNovember2006,ALFIissueditsreportonSwing Pricing.Thereportwas inspiredbytheCSSFCircular04/146onMarketTimingandLateTradingandALFI’sguidancepaperonmarkettimingandlatetradinginwhichswingpricingwasidentifiedasapossiblemeansofcompensatingthefundforthedilutioneffectoffrequenttrading.Itprovidesanoverviewofswingpricing,anddiscussesitsadvantagesanddisadvantages,implementationissuesandauditandlegalconsiderations.

VAT Circular No 723 No 723No 723

VATCircularNo72�of29December2006confirmedthat investmentvehicleswhosemanagementisVATexemptbyvirtueofarticle44,§1,d)oftheLuxembourgVATLawhavethestatusof“taxablepersons”forVATpurposes.DetailscanbefoundinChapter11.

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15.2. Future Developments in Luxembourg

ThefollowingfuturedevelopmentsinLuxembourginvestmentfundlegislation(CSSFCirculars)areexpected:

AcircularoneligibleassetsofUCITS:furthertotheDirectiveclarifyingeligibleassetsandCESR’sguidelines,anewCSSFcircularislikelybeforetheendofMarch2008

Updatedlegislationonmoneylaundering:LuxembourglegislationmustbeamendedtoimplementtheThirdAnti-MoneyLaunderingDirectiveanditsimplementingmeasuresbymid-December2007

Acircular adaptingCircular91/75 to the2002Law: inCircular0�/87, theCSSFclarified thatCircular91/75will berealignedtothe2002Lawbymeansofafuturecircular

AcircularontheroleofthecustodianofSIFs.

15.3. Clarifications regarding Eligible Assets

TheDirectiveoneligibleassetsandtheCESRguidelinesprovidethefollowingclarifications:

(i) Transferable securities

Transferablesecuritiesshouldmeetthefollowingcriteria:

(a) ThepotentiallossthattheUCITSmayincurasaresultofholdingthesecuritiesshouldnotbemorethantheamountpaid

(b) TheliquidityofthesecuritiesdoesnotcompromisetheabilityoftheUCITStorepurchaseorredeemitsunitsattherequestoftheunitholder.

(c) Areliablevaluationisavailableforthem

(d) Appropriateinformationisavailableforthem

(e) Theyarenegotiable

(f) Theiracquisitionisconsistentwiththeinvestmentobjectivesortheinvestmentpolicy,orboth

(g) TheirrisksareadequatelycapturedbytheriskmanagementprocessoftheUCITS.

FinancialinstrumentswhichareadmittedordealtinonaregulatedmarketarepresumednottocompromisetheabilityoftheUCITStorepurchaseorredeemitsunitsattherequestoftheunitholderandarealsopresumedtobenegotiable.

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CESRclarification:apartlypaidsecuritymustnotexposetheUCITStoalossbeyondtheamounttobepaidforit.

CESRclarification:indeterminingliquidity,thefollowingmayneedtobetakenintoaccount:

volumeandturnoverinthesecurity

ifthepriceisdeterminedbysupplyanddemandinthemarket,theissuesize,andtheportionoftheissuethattheassetmanagerplanstobuy;andevaluationoftheopportunityandtimeframetobuyorsell

wherenecessary,anindependentanalysisofbidandofferpricesoveraperiodoftimemayindicatetherelativeliquidityandmarketabilityoftheinstrument,asmaythecomparabilityoftheavailableprices

inassessingthequalityofsecondarymarketactivityinatransferablesecurity,analysisofthequalityandnumberofintermediariesandmarketmakersdealinginthetransferablesecurityconcernedshouldbeconsidered.

TheCSSFclarifiedthat,indeterminingliquidity,theentireportfoliomustbetakenintoconsiderationandnotonlytransferablesecurities,consideredindividually.

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CESRclarification:thesecurity’sriskanditscontributiontotheoverallriskprofileoftheportfoliomustbeassessedonanongoingbasis.

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thedefinitionoftransferablesecurities.Closedendfundsmusthowever,besubjecttocertaincorporategovernancemechanisms.Inaddition,wheretheassetmanagementactivityiscarriedoutbyanotherentityonbehalfoftheclosed-endfund,thatentitymustbesubjecttonationalregulationforthepurposeofinvestorprotection.

(ii) Money market instruments

Moneymarketinstrumentsshouldbeunderstoodtomeanthosewhich:

(a) Areadmittedtotradingordealtinonaregulatedmarketorarenotadmittedtotrading

Moneymarketinstrumentsnormallydealtinonthemoneymarketshouldbeunderstoodtomeanthosewhich:

(b) Haveamaturityatissuanceofnotexceeding�97days;

(c) Havearesidualmaturityofnotexceeding�97days

(d) Undergoregularyieldadjustmentsatleastevery�97days

(e) Haveariskprofilethatcorrespondstothatoffinancialinstrumentswhichhaveamaturityofnotexceeding�97daysandaresubjecttoayieldadjustmentatleastevery�97days.

(iii) Liquid instruments with a value which can be accurately determined at any time

(a) Money market instruments (MMIs) which are liquid are those that can be sold at limited cost in an adequatelyshort timeframe, taking intoaccount theUCITS’obligations torepurchaseor redeemitsunitsat therequestof theunitholder.

TheCSSFclarified that it isnotnecessary to analyze theeligibilityof theunderlyingassetsof the closed-endfundprovidingthatthelattermeetthetransferablesecuritiescriteriaandaslongastheydonotcontainembeddedderivatives.

Closed-endfundsofhedgefundswouldnot,however,beconsideredeligibleassets.

CESRisoftheviewthat:

Gainingexposuretopreciousmetalsthroughinvestmentinmoneymarketinstrumentsisforbidden

Shortsellingofmoneymarketinstrumentsisprohibited

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CESR clarification: treasury and local authority bills, certificates of deposit, commercial papers and banker’sacceptanceswillusuallybeconsideredasmoneymarketinstruments.

CESRadvisesthatwhenassessingtheliquidityofMMIs,thefollowingshouldbetakenintoaccount:

FrequencyoftradesandquotesfortheMMI

NumberofdealerswillingtobuyandselltheMMI,timeneededtoselltheMMI,methodofsolicitingoffersandmethodoftransfer

Sizeoftheissuance/program

Possibilitytorepurchase,redeemorselltheMMIinashortperiod,atlimitedcost,andwithshortsettlementdelay.

Whenassessingtheliquidityofthefund,CESRadvisesthatthefollowingfactorsbetakenintoconsiderationtoensurethatanysingleMMIdoesnotaffecttheliquidityofthefund:

UnitholderstructureandconcentrationofunitholdersoftheUCITS

Purposeoffundingofunitholders

Qualityofinformationonthefund’scashflow

Prospectusguidelinesonlimitingwithdrawals.

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(b) MMIswhichhaveavaluewhichcanbeaccuratelydeterminedatanytimemeans:

Theyallowthefundtocalculateitsnetassetvalueinaccordancewiththevalueatwhichthefinancialinstrumentheldintheportfoliocouldbeexchangedbetweenknowledgeablewillingpartiesinanarm’slengthtransaction

Theyarebasedeitheronmarketdataoronvaluationmodelsincludingsystemsbasedonamortizedcost.

MMIsnormallydealtinonthemoneymarketoradmittedto,ordealtinon,aregulatedmarketarepresumedtobeliquidandtohaveavaluewhichcanbeaccuratelydeterminedatanytime.

(iv) Instruments of which the issue or issuer is regulated for the purpose of protecting investors and savings

(a) Formoneymarketinstrumentswhicharethemselvesnotdealtinonaregulatedmarketbuttheissuerisregulated,thefollowingcriteriamustbemet:

Fulfiloneofthecriteriasetoutin(ii)c)–f)aboveandallofthecriteriasetoutin(iii)b)above

Appropriateinformationmustbeavailableforthem,includinginformationwhichallowsanappropriateassessmentofthecreditrisksrelatedtotheinvestmentinsuchinstruments

Freelytransferable.

(b) ForMMIsdescribedin(iv)a)above,andareissuedbyanundertakingthesecuritiesofwhicharedealtinonaregulatedmarketorissuedbyotherbodiesbelongingtothecategoriesapprovedbytheUCITS’competentauthorities,appropriateinformationasmentionedin(iv)a)above,shouldconsistof:

InformationonboththeissueortheissuanceprogrammeandthelegalandfinancialsituationoftheissuerpriortotheissuanceoftheMMI

Updatesofthisinformationonaregularbasisandwheneverasignificanteventoccurs

Verificationofthisinformationbyqualifiedthirdpartiesnotsubjecttoinstructionsfromtheissuer

Availableandreliablestatisticsontheissueortheissuanceprogramme.

(c) ForMMIsdescribedin(iv)a)aboveandissuedorguaranteedbyanestablishmentsubjecttoprudentialsupervision,appropriateinformationasmentionedin(iv)a)above,shouldconsistof:

Informationontheissueortheissuanceprogrammeoronthelegalandfinancialsituationoftheissuerpriortotheissueofthemoneymarketinstrument

Updatesofthisinformationonaregularbasisandwheneverasignificanteventoccurs

Available and reliable statistics on the issue or the issuance programme or other data enabling an appropriateassessmentofthecreditrisksrelatedtotheinvestmentinsuchinstruments.

(d) ForMMIsissuedorguaranteedbyacentral,regional,orlocalauthorityorcentralbankofaMemberState,theEuropeanCentralBank,theEUortheEuropeanInvestmentBank,anon-MemberStateor,inthecaseofaFederalState,byoneof themembersmakingup the federation,orbyapublic internationalbody towhichoneormoreMemberStatesbelong,appropriateinformationasmentionedin(iv)a)above,shouldconsistofinformationontheissueortheissuanceprogrammeoronthelegalandfinancialsituationoftheissuerpriortotheissueoftheMMI.

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CESRisoftheviewthatifanamortizationmethodisusedtoassessthevalueofanMMI,thefundmustensurethatthiswillnotresultinamaterialdiscrepancybetweenthevalueoftheMMIandthevaluecalculatedaccordingtotheamortizationmethod.CESRprovidesexamplesofinstrumentswhichwouldnormallycomplywiththiscondition.

CESR’sviewisthatregularupdatesshouldnormallyoccuronanannualbasisandthatthirdpartiesshouldspecializeintheverificationoflegalorfinancialdocumentationandbecomposedofpersonsmeetingprofessionalstandardsofintegrity.

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(a) Suchinstrumentsmustfulfilthefollowingcriteria:

Theirunderlyingconsistsofoneormoreofthefollowing:

AssetslistedinArticle41(1)ofthe2002Law(seesection2.2.1.)

Interestrates

Foreignexchangeratesorcurrencies

Financialindices

InthecaseofOTCderivatives,thecounterpartiesareinstitutionssubjecttoprudentialsupervisionandbelongingtothecategoriesapprovedbytheUCITS’competentauthoritiesandtheOTCderivativesaresubjecttoreliableandverifiablevaluationonadailybasisandcanbesold,liquidatedorclosedbyanoffsettingtransactionatanytimeattheirfairvalueattheUCITS’initiative

(b) Financialderivativeinstrumentsshouldmeetthefollowingcriteria:

Theyallowthetransferofthecreditriskofanassetindependentlyfromtheotherrisksassociatedwiththatasset

TheydonotresultinthedeliveryorinthetransferofassetsotherthanthosereferredtoinArticles41(1)and41(2)ofthe2002Law(seesection2.2.1.)

TheycomplywiththecriteriaforOTCderivatives

TheirrisksareadequatelycapturedbytheriskmanagementprocessoftheUCITS.

(c) AreliableandverifiablevaluationisunderstoodtorefertoavaluationbytheUCITS,correspondingtothefairvalue.Fairvalueisunderstoodtorefertotheamountforwhichanassetcouldbeexchanged,oraliabilitysettled,betweenknowledgeable,willingpartiesinanarm’slengthtransaction.Itshouldnotrelyonlyonthemarketquotationsbythecounterpartyandshouldfulfilthefollowingcriteria:

Thebasisforthevaluationiseitherareliableup-to-datemarketvalueoftheinstrument,or,ifsuchavalueisnotavailable,apricingmodelusinganadequaterecognizedmethodology

VerificationofthevaluationiscarriedoutbyanindependentthirdpartyoraunitoftheUCITSindependentfromthatinchargeofmanagingtheassetsandwhichisadequatelyequippedforsuchpurpose.

(d) Liquidfinancialassetsexcludesderivativesoncommodities.

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CESRisoftheviewthataprocessmustbedevelopedwhichenablestheUCITS,throughoutthelifeofthederivative,tovaluetheinvestmentconcernedwithreasonableaccuracyatitsfairvalueonareliablebasisreflectinganup-to-datemarketvalue.Thisprocessmustincludeorganizationandmeansallowingforariskanalysisrealizedbyadepartmentindependentfromcommercialoroperationalunitsandfromthecounterpartyor,iftheseconditionscannotbefulfilled,byanindependentthirdparty.

Inthelattercase,theUCITSremainsresponsibleforthecorrectvaluationoftheOTCderivativesandmust,interalia,checkthattheindependentthirdpartycanadequatelyvaluethetypesofOTCderivativesitwishestoconclude.

Lastly,thisorganizationoftheUCITSimpliesthatrisklimitsaretobedefined.

CESRbelievesthat‘independent’and‘adequatelyequipped’meansaunitwhichhastheadequatemeanstoperformthevaluation.ThisimpliesthattheUCITSusesitsownvaluationsystems,whichcanhoweverbeprovidedbyanindependentthirdparty-excludingtheuseofvaluationmodelsprovidedbyathirdpartyrelatedtotheUCITS(suchasadealingroomwithwhichOTCderivativesareconcluded)whichhavenotbeenreviewedbytheUCITS,andexcludingtheuseofdata(suchasvolatilityorcorrelations)producedbyaprocesswhichhasnotbeenqualifiedbytheUCITS.

CESRisoftheviewthateligibleassetsexcludenon-financialindices.

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(vi) Financial indices

Financialindicesaredefinedasthosemeetingthefollowingcriteria:

(a) Theyaresufficientlydiversified

(b) Theyrepresentanadequatebenchmarkforthemarkettowhichtheyrefer

(c) Theyarepublishedinanappropriatemanner

(vii) Transferable securities and money market instruments embedding derivatives

a) Suchfinancialinstrumentsmustcontainacomponentwhichfulfilsthefollowingcriteria:

Someorallofthecashflowsthatotherwisewouldberequiredbythetransferablesecuritywhichfunctionsasahostcontractcanbemodifiedaccordingtoaspecific interest rate, financial instrumentprice, foreignexchangerate,indexofpricesorrates,creditratingorcreditindex,orothervariable,andthereforevaryinawaysimilartoastand-alonederivative

Itseconomiccharacteristicsandrisksarenotcloselyrelatedtotheeconomiccharacteristicsandrisksofthehostcontract

Ithassignificantimpactontheriskprofileandpricingofthetransferablesecurity.

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CESR’sguidelinesstatethatindicesbasedonfinancialderivativesoncommoditiesorindicesonpropertymaybeeligibleprovidedtheycomplywiththecriteriasetdownforfinancialindices.

Ifderivativesontheindexareusedforrisk-diversificationpurposes,providedthattheexposureoftheUCITStotheindividualindicescomplieswiththe5/10/40%ratios,thereisnoneedtolookattheunderlyingcomponentsoftheindividualindicestoensurethattheyaresufficientlydiversified.

In its guidelines dated July 2007 entitled The classification of hedge fund indices as financial indices, CESRclarifiedthatahedgefundindexmaybeconsideredtobea‘financialindex’aslongasitcomplieswithvia)–c)above.However,ahedgefundindexwillnotbeclassifiedasafinancialindex:

(i) unlessthemethodologyoftheindexprovidesfortheselectionandthere-balancingofcomponentsonthebasisofpre-determinedrulesandobjectivecriteria

(ii) iftheindexprovideracceptspaymentsfrompotentialindexcomponentsforthepurposeofbeingincludedintheindex,or

(iii) ifthemethodologyoftheindexallowsretrospectivechangestopreviouslypublishedindexvalues.

CESRalsostatedthatwhengainingexposuretoahedgefundindexbymeansofanOTCderivative,aUCITSmustcomplywiththerelevantUCITSprovisions,including:

Counterpartyrequirements

Requirementsaboutvaluationandtheabilitytocloseaposition

Requirementsaboutriskmanagementandvaluationprocesses

Requirementsaboutriskexposure.

In addition,whengainingexposure to ahedge fund index, aUCITSmust carryout appropriateduediligence,includingconsiderationbytheUCITSofthequalityoftheindex.

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ionb) Atransferablesecurityormoneymarketinstrumentshallnotberegardedasembeddingaderivativewhereitcontains

a component which is contractually transferable independently of the transferable security or the money marketinstrument.

(viii) Techniques and instruments for the purpose of efficient portfolio management

Suchtechniquesandinstrumentsmustmeetthefollowingcriteria:

Beeconomicallyappropriateinthattheyarerealisedinacost-effectiveway

Beenteredintoinordertoreducecosts,reduceriskorgenerateadditionalcapitalorincomeforthefundwithalevelofriskwhichisconsistentwiththeriskprofileofthefundanditsriskdiversificationrules

Theirrisksareadequatelycapturedbytheriskmanagementprocessofthefund.

(ix) Index replicating UCITS

a) IndexreplicatingUCITSarethosewhichreplicatethecompositionoftheunderlyingassetsoftheindex,includingtheuseofderivativesandothertechniquesandinstruments

b) Anindexwhosecompositionissufficientlydiversifiedisanindexwhichcomplieswiththeriskdiversificationrules

c) Anindexwhichrepresentsanadequatebenchmarkisanindexwhoseproviderusesarecognizedmethodologywhichgenerallydoesnotresultintheexclusionofamajorissuertothemarkettowhichitrefers

d) Anindexwhichispublishedinanappropriatemannerisanindexthatisaccessibletothepublicandtheproviderofwhichisindependentfromtheindex-replicatingUCITS.

15.4. Future Developments in EU Legislation - Updating the UCITS Directive

TheremainderofthischapterfocusesinparticularonthefuturedevelopmentoftheEUUCITSlegislation.

Proposals to overcome shortcomings of the UCITS regime

TheEuropeanCommission’sGreenPaperinJuly2005highlightedthefollowingshortcomingsoftheUCITSregime:

Bottlenecksandfailuresoftheproductpassport

Sub-standardinvestordisclosures

Proliferationofsmallandinefficientfunds

Obstaclestofunctionalandgeographicspecialization.

Following extensive consultations with the investment fund industry and stakeholders in an attempt to address theseshortcomings,theEuropeanCommissionissueditslongawaitedWhite Paper on Enhancing the Single Market Framework for Investment FundsinNovember2006.TheWhitePaperintendedtogivetheinvestmentfundindustrythemeanstostaycompetitiveandtotakefulladvantageofthesinglemarket.TheWhitePaperissummarizedinSection15.4.1.

InMarch2007,theEuropeanCommissionpublished,itsInitial Orientations of Possible Adjustments to UCITS Directive (85/6��/EC),forpublicconsultation.ThekeyamendmentsproposedareoutlinedinSection15.4.2.

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CESRstatesthatcollateralizeddebtobligations(CDOs)orassetbackedsecuritiesusingderivativeswillgenerallynotqualifyasstructuredfinancialinstruments(SFIs)embeddingderivatives.

WhereaproductisstructuredasanalternativetoanOTCderivative,itstreatmentshouldbesimilartothatofanOTCderivativeinstrument.

CESRbelievesthatthefollowinginstrumentscouldembedderivatives:

creditlinkednotes

convertiblebonds

exchangeablebonds

SFIswhoseperformanceislinkedtotheperformanceofabondindex

SFIswhoseperformanceislinkedtoabasketofshares

SFIswithanominalfullyguaranteedwhoseperformanceislinkedtotheperformanceofabasketofshares.

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15.4.1. The White Paper – November 2006

TheWhitePaperproposedthefollowingchanges:

Simplification of the notification procedures

TheEuropeanCommissionagreedtoproposeamendmentstotherelevantarticlesoftheUCITSDirectiveandstatedthatdocumentationandotherexchangeswouldtakeplaceonaregulator-to-regulatorbasisandthatsupervisorycooperationmechanismswouldbeintroduced.Hostsupervisorsshouldfocusoncompliancewithlocalmarketingandadvertisingrulesbytheintermediariesresponsibleforthoseactivitiesinthehostcountry.

The White Paper, on the other hand, stated that the authorization procedure would not be amended. However, theCommissionurgednationalauthoritiestoexpeditefundapprovalsandtointroduceastrictdeadlineforauthorizationinthehomecountry.Itisconfidentthatauthoritieswithaninterestinasuccessfuldomesticfundbusinesswillimplementefficientandreliableauthorizationprocedures.

Creation of a framework for the cross-border mergers of funds and asset pooling

More than half of European funds manage less than €50 million in assets. In addition, the total expense ratio of a typical cross-borderEuropeanequityfundisdoublethatofacomparableAmericanfund.

Inordertoexploiteconomiesofscale,theEuropeanCommissionagreedtoproposeadditionstotheUCITSDirectivetocreatetheappropriatelegalandregulatoryconditionsforthemergeroffunds.Suchaframeworkwouldrelatetothemergermechanismitself(i.e.advancedisclosure,possibilityofredemptionfreeofcharge),ratherthantothetaximplications.

TheCommissionstated that itwill takenon-legislativeaction,viaacommunication toclarify thatnational tax-neutralarrangementsshouldbeextendedtomergersinvolvingfundsdomiciledinanotherMemberState.

Anotherpotentialwayofexploitingeconomiesofscaleisassetpooling;beitentitypooling(i.e.theaggregationoftheassetsofparticipatingfundsinaseparatelegalentity,suchasmaster-feederfunds)orvirtualpooling(i.e.theaggregationofassetsofparticipatingfundsbyusinginformationtechnology).

CurrentUCITSdiversificationrequirementsruleoutentitypooling,whereasvirtualpoolingraisessupervisoryconcerns,asitistechnicallyamorechallengingtechnique.

AsaresulttheEuropeanCommissionagreedtoproposeamendmentstothediversificationrulesandotherprovisionsoftheDirectiveinordertoallowanexpansiveapproachtoentitypooling.TheCommissionwasalsotoexplorethesoundnessofvirtualpoolingtechniquesandtheneedforDirectiveamendmentstoprovidelegalcertaintyandunderpinmanagementandsupervisionofsuchstructures;ithassinceoptedagainstmakinganyrelatedproposal.

Enabling the management company passport

The2001amendmentstotheUCITSDirectiveregardingthemanagementcompanypassporthavenotprovedeffectiveasamanagementcompanystillneedstobeestablishedineachMemberStatewherefundsaredomiciled.

TheCommissionagreedtoproposeamendmentstotheDirectivetoimprovetheorganizationalflexibilityofmanagementgroupsandallowanauthorizedmanagementcompanytomanagefundsinotherMemberStates.Suchamendmentsshouldalsoaddresstheconcernsthatsupervisorsexpressedregardingsplittingresponsibilitiesforsupervision.

TheamendmentstotheDirectivewillnotcoverthedepositarypassport.

Message routing and fund order processing/settlement

Thetreatmentofsubscriptionandredemptionordersstilllacksautomationandstandardization,whichresultsinincreasedcosts,delaysandrisks.Since,theinefficienciesarenotoflegislativeorregulatorynaturetheCommissionhascalledupontheEuropeanindustrytodevelopastrategytophaseinthenecessaryimprovementsinthisarea.

Strengthening of supervisory co-operation

TheproposedamendmentstotheDirectivewillresultinincreasedcross-borderoperations.Effectivesupervisionofsuchoperationswillonlyworkifthereisfullandtimelycooperationbetweenauthorities.

As a result the Commission agreed to propose amendments to strengthen the provisions of the Directive relating tocompetentauthoritiesandsupervisorycooperation.Suchamendmentswillbemodeledonprovisionsofrecentsecuritieslegislation.(i.e.MiFIDandtheProspectusDirective)

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ion15.4.2. Proposed modifications to the UCITS regime

Thekeyamendmentsproposedby theEuropeanCommission in its Initial Orientations of Possible Adjustments to the UCITS Directive (85/6��/EC)areasfollows:

(i) Simplification of the notification procedure

Tomarket theunitsofaUCITS inanotherMemberState (ahostMemberState),aUCITSshouldsubmitasetofrelevantdocumentationtoitshomeMemberStateauthorities.OnlyKeyInvestorInformation(seeii)mustbetranslatedintothelocallanguageofthehostMemberState.Detailsoffacilitiesavailablefortransactionsrelatingtofundunitsanddistributionshouldbeincluded.TheauthoritiesofthehomeMemberStateshouldverifythatnodocumentismissingbeforetransmittingittothehostauthorities.MarketingofUCITSmaybegininthehostMemberStatethreedaysaftertransmissionofthenotificationbythehomeMemberState.

(ii) Simplified Prospectus/Key Investor Information

TheSimplifiedProspectuswasmeant to provide investorswith concise andunderstandable information about theinvestmentpolicy,risksandassociatedchargesofafund.Ithassufferedfromdivergentimplementationandlengthydocumentsthathavebeenoflimitedusetotheinvestors.

The initial orientations foresee a new document entitled ‘Key Investor Information’ which contains fair and clearinformationthatisnotmisleading.Itshouldalsobeconsistentwiththefullprospectusandliabilityissuesshouldbemadeclear.

Theinformationcontainedthereinwouldbeasfollows:

Productinformation,includingcostsrelatingtothepurchaseofunits,risksandotheressentialcharacteristicswhichwouldhave an important bearingon the investment.Such informationwouldbe confined to thosedisclosureswhicharemeaningfulandusefultothepotentialinvestor.

Practicalinformationthatshouldbeconveyedtoinvestorstoenablethemtoadequatelyexercisetheirrights.Someinformationpointscoulddifferaccordingtothedomicileoftheinvestorincertainwell-definedcases.

Thedetailedcontentandformoftheinvestordisclosureswouldnotbespecified.Legislationwould,however,expandontheguidingprinciples.

ProductinformationwouldremainconsistentbetweencountriesandonlytranslationsintothelocallanguageofthehostMemberStatewouldbeallowed.

Thedistributorsandintermediarieswouldberesponsiblefordisclosingcostsandfeesrelatingtothesalesandadvisoryprocess.

(iii) Facilitating fund mergers

The orientations foresee a flexible regime for cross-border mergers of UCITS as well as domestic mergers. ThenewregimewouldrequireMemberStatestoprovideforthepossibilitytomerge/amalgamatetwoUCITSfunds(orcompartmentsthereof)throughthreetypicalmethods:(i)mergerbyabsorption;(ii)bycreatinganewfund;or(iii)mergerbywayofaschemeofamalgamation.Boththemerging/dissolvingandreceivingfundshouldbeauthorizedas UCITS before the merger can proceed. In addition, the receiving fund must be notified for marketing in eachMemberStatewherethemerging/dissolvingfundwasnotified.Therewouldbenorequirementtomergefundswithsimilarinvestmentpolicies.Thepowersofthecompetentauthoritiesofthemergingfundarelimitedtoensuringthattheenvisagedprocedurehasbeen followed; the receiving fundauthoritieswouldhavenosay.National lawwoulddeterminewhether investorsvoteonthemerger.Investors in themergingfundwouldhavetheright toexitfreeofredemptionfees.Thefundwouldnotbearmergercosts.

(iv) Implementing master-feeder structures

Aspecialregimeshouldbecreatedformaster-feederstructures–includingsituationswherethemasteroroneormoreof thefeeders is located inanotherMemberState.Thefeedershould investat least85%of itsassets intoasinglemasterfund–bothfundsshouldthereforehavesimilarinvestmentpoliciesandbeUCITSfunds.Thefeeder,however,wouldhavelimitedpossibilitytoinvestinderivativefinancialinstrumentseithertomodifyitsperformanceortohedgecurrencyrisks.

Implicationsofinvestingintothemasterviathefeedershouldbeclearlydisclosedbothregardinginvestmentpolicyandfees.Neitherfeedersinvestingintoseveralmastersnorvirtualpoolingareenvisagedatthisstage.

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(v) Management company passport

TherightofamanagementcompanywithanEUpassporttomanageUCITSfundsdomiciledinanotherMemberStatewillbeenabled.Theremust,however,be‘substance’inthedomicileofthefund.Themanagementcompanywouldbeallowedtoundertakethefullrangeofcollectiveportfoliomanagementservices;howeveritwillnotbepermittedtomaintaintheshareholderregisterandperformreportingofvaluationsremotely;theseactivitiescouldbeperformedbybranchesorbydelegates.Thecustodianwillalsoremaininthedomicileofthefund.

(vi) Supervisory cooperation

Theorientationshighlighttheneedtostrengthenthecurrentprovisionsto(i)enhanceequivalencepowersforcompetentauthorities;(ii)developexistingmechanismsrelatingtoexchangeofinformation;and(iii)createarrangementswhichallowcompetentauthoritiesofaMemberStatetocarryoutspontaneousverificationofinformationandinvestigationinanotherMemberState,orhavethemcarriedoutbytheauthoritiesofanotherMemberStateorthirdparty.

Appendices

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APPENDIX I Withholding Tax Rates Applicable to Luxembourg UCIs

General remarks

The information given below is a simplified summary prepared in spring 2007 and is subject to continuous changes andexceptions.Itisessentialthatpromoterscontacttheirtaxadvisersinordertoobtaincompleteanduptodateinformationbeforemakinginvestmentdecisions.

OnlycertaindoubletaxationtreatiessignedbyLuxembourgareapplicabletoLuxembourgfunds.Treatieswiththefollowing26countriesshouldbeapplicable:

Austria Israel Portugal TrinidadandTobago

China Korea Romania Tunisia

Denmark Malaysia Singapore Turkey

Finland Malta SlovakRepublic Uzbekistan

Germany Mongolia Slovenia Vietnam

Indonesia Morocco Spain

Ireland Poland Thailand

Theapplicabilityofsuchdoubletaxationtreaties,however,isnotalwaysclear.InprincipleFCPswillnotbenefit(with,inpractice,certainexceptions)unless theunitholdersthemselvesareabletoclaimthereducedrateunderthedoubletaxationtreaty,which,inpractice,maybeverydifficult.

A UCI may have a subsidiary to benefit from a double taxation treaty; this is now the practice for investing in certaincountries.

Ernst&Young’sGlobal Withholding Tax Reporter(GWTR)isasubscription-basedservicethatprovidesdetailedtechnicalinformation regarding Withholding Taxes on portfolio dividends, portfolio interest and capital gains in �4 countries. TheGWTR, which is tailored to the needs of the global financial institutions, contains valuable information such as statutorywithholdingrates,treatywithholdingratesandtaxreliefprocedures.TheGWTR,aweb-basedtool,providesmonthlyupdatesthatarebasedonquarterlyreviewsofinformation.Importanttaxalertsaree-mailedtolicenseesbetweenupdates.Pleasevisitoursamplewebsite,www.globaltaxreporter.com,formoreinformationregardingtheGWTR.

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Withholding Tax Rates

Applicable to Luxembourg UCIs Appendix I

Country of investment

Type of income

Interest Capital gains on sale of

securities %�Dividends %�Corporate bonds

%�Government

bonds %�

Angola 10(1) 10(2) 0 0

Argentina 0(1) 0(2) 0 0(�)

Aruba 0-10(1) 0 0 0

Australia 0(1) 10(2) 10(2) 0(�)

Austria 15(1) 0 0 0

Azerbaijan 10 10 10 10

Bahamas 0 0 0 0

Bahrain 0 0 0 0

Seefootnotes()opposite.

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Footnotes

Angola (1) A temporaryexemptionofwithholding taxondividendsmaybeavailable as a resultof taxincentives granted to entities operating in Angola in accordance with private investmentregulations.

(2) Interestontreasurybondsandpublicdebenturesissuedunderspecificlegislationareexemptfromwithholdingtax.

Argentina (1) Thegeneralwithholdingtaxratefordividendsis0%.However,incaseofdividendpaymentsinexcessofthetaxableincomeofthedistributingcompany(withcertainadjustments),suchexcesswillbesubjecttoa�5%withholdingtax.

(2) A0%withholdingtaxrateappliestointerestoncorporatebondsprovidedcertainrequirementsaremet(e.g.,publicoffering).Otherwise,15.05%withholdingtaxwillbeappliedwheninterestderives frombonds registered incountrieswithwhichArgentinahas signedMutualTreatiesforInvestmentProtection,providedregistrationinArgentina,pursuanttoLaw2�576,ismadewithin two years following issuance. Luxembourg and Argentina have signed a Treaty forInvestmentProtection.�5%withholdingtaxwillapplyoncorporatebondsnotincludedinanyoftheselattertwocategories.

(�) Regarding the sale of shares, there is an exemption for foreign beneficiaries established byDecree2284/91.Although therewas a former rule taxing “off-shore entities”on the saleofshares,anopinionissuedbytheArgentineGeneralAttorneyhasstatedthatsuchruleisnolongerin force. Consequently, theArgentine market – following theArgentine GeneralAttorney’scriterion–iscurrentlynotapplyingwithholdingtaxatsourceonsuchtypeofcapitalgains.

Aruba (1) A10%dividendwithholdingtaxhasbeen introduced.It is reducedto5%ifmore than50%of shares (also representing50%of thevoting rights)of thedistributingcompanyare listedonanacknowledgedstockexchangeorthesharesofitsparentcompanyarelisted.Therateof0%isapplicabletodomesticdistributionsonwhichtheparticipationexemptionisapplicable.ArubaExemptCompanies(AVVs)performingexemptactivitiesandArubaLimitedLiabilityCompanies(NVs)undertheoffshoreregimeareexemptfromdividendwithholdingtax.AVVsandNVsthathaveoptedforataxtransparenttreatmentarenotsubjecttodividendwithholdingtax.

Australia (1) A0%withholdingtaxrateappliesonfrankeddividends(paidoutofprofitsonwhichcorporatetaxhasbeenpaid).Otherwisetherateis�0%.

(2) WhereanAustralianStateorFederalGovernment(orgovernmentauthority)orresidentcompanyraisesfunds,bytheissueofbondswhichsatisfiesapublicoffertestandcertainotherconditions,anexemptionisavailablewhichwillreducetheinterestwithholdingtaxtonil.

(�) Disposalsbyforeignresidentsofnon-portfolio(10%ormore)interestsinAustralianorforeignentitiesaresubjecttoAustraliancapitalgainstaxiftheentity’sassetsareprincipallyderivedfromAustralianrealestateproperty.

Austria (1) LuxembourgSICAVsandSICAFsqualify for theapplicationof theDoubleTaxationTreatyandthewithholdingtaxrateisreducedfrom25%to15%(reductionorrefundformsaretobesubmitted).Inprinciplethe25%rateappliestoFCPsunlesstheunitholdersthemselvesareabletoclaimthereducedrateundertheDoubleTaxationTreaty.

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Withholding Tax Rates

Applicable to Luxembourg UCIs Appendix I

Country of investment

Type of income

Interest Capital gains on sale of

securities %�Dividends %�Corporate bonds

%�Government

bonds %�

Bangladesh 15(1) 10(2) 10(2) 0(�)

Barbados 0/15(1)(2) 15(2) 0 0

Belarus 15 40(1) 0(1) 40/0(2)

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Bangladesh (1) Dividendsreceivedfrommutualfundsorunitfundsareexemptfromwith-holdingtaxuptoTaka25,000.

(2) ThewithholdingtaxrateoninterestonanysecurityoftheGovernmentoranysecurityapprovedbytheGovernmenthasbeenfixedat10%.

(�) A0%withholdingtaxrateappliestocapitalgainsfromthesaleofsharesofpubliccompaniesandonareciprocalbasis.CapitalgainsonsaleofGovernmentsecurities,stocksandsharesofpublicandlistedcompaniesareexemptfromtax.CapitalgainsarisingfromtransferofsharesofacompanyregisteredunderCompaniesAct1994aswellasofthosenotlistedwithastockexchangeinBangladesharetaxedatarateof10%.

Barbados (1) It isproposed that from1April2007dividendspaidbya resident company tonon-residentshareholders are exempt fromwithholding taxwhere suchdividendsarepaidoutof foreignsource income earned by the company. However, dividends paid out of Barbados sourcedincomewillbesubjecttowithholdingtaxattherateof15%.

(2) Income paid by companies in the International Business and Financial Services Sector isexempt.

Belarus (1) UnderBelarussiantaxlaw,interestonbondsisconsideredtobeincomefromoperationswithsecuritiesandissubjecttowithholdingtaxatanincreasedrateof40%,whileinterestonordinaryloanswouldbesubjecttowithholdingtaxat10%.

(2) 40%capitalgainstaxischargedonthesaleofcorporatebondsand0%onGovernmentbonds.

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Withholding Tax Rates

Applicable to Luxembourg UCIs Appendix I

Country of investment

Type of income

Interest Capital gains on sale of

securities %�Dividends %�Corporate bonds

%�Government

bonds %�

Belgium 0/15/25(1) 15(2) 15(2) 0

Bermuda 0 0 0 0

Bolivia 0(1) 0(1) 0(1) 0(1)

Botswana 15 15 15 0(1)

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Belgium (1) TheratesofwithholdingtaxondividendsfromBelgiancompaniesareasfollows:

LuxembourgType of Belgian company Type of share SICAV/ SICAF FCPBelgiancompany(seeexceptionsbelow)

OrdinaryVVPR*

25%15%

25%15%

Realestateinvestmentcompany(VBEVAK/SICAFI) All 0/15%** 0/15%**Publicprivateequityinvestmentcompany(PrivatePRIVAK/PRICAVPrivé) All 0***/15% 0***/15%

Privateequityinvestmentcompany(PRIVAK/PRICAV) All 0***/15****/25% 0***/15****/25%Otherinvestmentcompanies(BEVEK/SICAV,BEVAK/SICAF,VBS/SIC)

DividendsfromBelgiandividendsreceivedbyinvestmentcompanies

• All 15% 15%

Allotherdividends• All 0% 15%

* VVPRshares(VerlaagdeVoorheffing/PrécompteRéduit)arenon-preferentialsharesissuedonorafter1January1994pursuanttoapublicoffering,ornon-preferentialsharesissuedonorafter1January1994pursuanttoacapitalcontributionincashprovidedthesharesareeither(i)issuedandmaintainedinregisteredform,or(ii)havebeenheldinopendeposit(i.e.inasecuritiesaccount)withabank,publiccreditinstitutionorabroker,thatissubjecttoprudentialsupervisioncontrolbytheBelgianBankingandFinanceCommissionsincetheirdateofissuance.PleasenotethatVVPRshareslistedonEuronextthatareissuedbycompanieshavingissuedbothordinaryandVVPRsharesrequiresimultaneouspresentationofVVPRandordinarycouponstriptobenefitfromreducedVVPRrate.

** 0%rateappliestorealestateinvestmentcompaniesthathaveinvestedatleast60%oftheirassetsinresidentialpropertylocatedinBelgium.

*** Dividends fromcapitalgainsonshares realizedby the investmentcompanyareexemptfromwithholdingtax.

****15%ratesapplies,because inpracticeshares inprivateequity investmentcompanywillusuallyconstituteVVPRshares.

•

•

(2) Anexemption fromwithholding tax is available to aLuxembourg investment company (thatis not an FCP) under domestic law in respect of interest paid on a registered bond providedthe company has not allocated the bond to a Belgian establishment and is registered in thebondholder’sregisterduringtheentirecouponperiodasownerorusufructuaryofthebond.Ifwithholdingtaxhasbeenappliedatsource,thenon-residentinvestormayclaimarefundofthewithholdingtaxrelatingtotheinterestaccruedduringtheperiodheownedtheregisteredbond.

AnexemptionfromwithholdingtaxisequallyavailabletoaLuxembourginvestmentcompany(including FCPs the units of which are not tradable in Belgium and have not been issuedpursuanttoapublicofferinginBelgium)inrespectofdebtsecuritiesheldintheX/Nsystem(dematerializedgovernmentdebtsecurities,certificatesofdeposit,treasurycertificates,privatebondsinglobalbearerform).

Bolivia (1) InBolivia,the“fontprinciple”isappliedtoincometax.Therefore,foreignincomeisnotsubjecttotaxes.

Botswana (1) CapitalgainstaxonsecuritiesnotlistedontheBotswanastockexchangeis18.75%.

116

Withholding Tax Rates

Applicable to Luxembourg UCIs Appendix I

Country of investment

Type of income

Interest Capital gains on sale of

securities %�Dividends %�Corporate bonds

%�Government

bonds %�

Brazil 0 15 15(1) 0(2)

British Virgin Islands 0 0 0 0

Bulgaria 7 10(1)(2) 10(1)(2) 10(1)

Cameroon 15(1) 15(1)(2) 15(1)(2)(�) 0

Canada 25 25(1) 0 0(2)

Cayman Islands 0 0 0 0

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Brazil (1) StateGovernmentbondsaretaxedat15%.However,mostFederalGovernmentbondsacquiredafter16February2006,aretaxedat0%(theexemptionisnotapplicableforresidentsoflowtaxjurisdictions).

(2) Gainsrealizedbyinvestors,investinginBrazilinaccordancewithResolutionofCentralBankofBrazil2.689/00,uponsaleorexchange transactionscarriedout inBrazilstock, futuresorcommoditiesexchangesarecurrentlyexemptfromincometax.Residentsoflowtaxjurisdictionsand non-residents not located in a low tax jurisdiction but investing in the Brazilian capitalmarketwithoutcomplyingwithResolution2.689/00aresubject tothesametaxtreatmentasBrazilianresidents(i.e.,Brazilianresidentsaregenerallysubjecttowithholdingtaxratesvaryingfrom15%to22.5%ontheincome/gainderivedfromlistedsecurities).

Pleasenotethatgainsofunlistedsecuritiesaresubjecttoa15%capitalgainstax(residentsoflowtaxjurisdictionsaresubjecttoa25%capitalgainstaxonthesaleofunlistedsecurities).

Bulgaria (1) TheBulgarianwithholdingtaxrateoninterestandcapitalgainshasbeenreducedfrom15%to10%since1January2007.ItappliestointerestandcapitalgainspaidinfavourofforeignindividualsandforeignentitiesbyBulgarianentities.

(2) Interestonbonds,whicharetradableonaregulatedmarketofsharesandsecuritiesinBulgariaorinaEU-memberstateisnotsubjecttowithholdingtaxinBulgaria.

Cameroon (1) Due to the absence of a DoubleTaxationTreaty between Cameroon and Luxembourg, it ispossiblethat thetaxauthoritiesapplyconsular taxesamountingto10%,whichwouldgiveaglobalrateof16.5%.

(2) Thistaxationappliesinprinciple.Adecreedated19February1976suspendedthewithholdingatsourceofincometaxonmovablecapitalrelatingtotheinterestandassimilatedrevenuesamongwhichshouldbecorporatebonds.However,basedon informationfromthe taxdepartment’slegislationdivision,thisdecreeisnolongerapplicable.

(�) The tax reformaccidentally repealed theexemption fromwithholding tax incomeapplicabletogovernmentbonds.However,thetaxadministrationmaystillconsiderthatthisexemptionisapplicable.

Canada (1) Interestoncertainlongtermdebtbondsisexempt.

(2) Taxisapplicableonthecapitalgainfromthesaleof“taxableCanadianproperty”(e.g.land,sharesofCanadianprivatecorporations).

118

Withholding Tax Rates

Applicable to Luxembourg UCIs Appendix I

Country of investment

Type of income

Interest Capital gains on sale of

securities %�Dividends %�Corporate bonds

%�Government

bonds %�

Chile 21.69(1)(5) 4(5) 4(5) �5(2)(�)(4)(5)

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Chile (1) Therateondividendspaidtonon-residentsis�5%lesstheimputationcreditforthecorporateincometaxpaidatsource(creditmayvarybetween0%and17%).Assumingacorporatetaxcredit equivalent to the current corporate tax rate (17%), effective withholding on the netdividendisequivalentto21.69%.

(2) Capitalgainsderivedfromthesaleofshares(notbonds)issuedbyalistedcorporationwithastockmarketpresenceineithera)aChileanstockmarketorb)astockmarketauthorizedbytheChileanSecuritiesCommissionorc)inatenderofferregulatedbyTitleXXVoftheChileanSecuritiesLaw,willbetaxexempt.Thisisprovidedthestockwasacquiredata)astockmarketorb)atenderofferregulatedbyTitleXXVoftheChileanSecuritiesLaworc)aninitialofferingofstockissueduponincorporationorcapitalincreaseord)aconvertiblebondexchange.

(�) Capital gains obtained by foreign funds that qualify as a “Foreign Institutional Investor”,derivedfromthesaleofstockinlistedcorporationsthathaveastockmarketpresenceorbondsorotherdebtsecuritiesissuedbyeitherChileancorporations,theChileanCentralBankortheGovernment,executedinthestockmarketorinatenderofferregulatedbyTitleXXVoftheChileanSecuritiesLaworanyothersystemauthorizedbytheChileanSecuritiesCommission,willbeexemptfromcapitalgaintaxes.However,suchForeignInstitutionalInvestorshavetocomplywithanumberofrequirementsinordertobenefitfromthisexemption.

(4) All other capital gains derived from the sale of securities are subject to a 17% income taxprovidedallofthefollowingrequirementsaremet:a)thesellerhasheldthesharesforatleastoneyear;b)sellermustnotbehabituallyengaged in thesaleandpurchaseofshares;c) thesaleismadetoanunrelatedparty.A�5%incometaxonthegainwouldapplyifanyoftheserequirementsarenotsatisfied.

(5) ForeigninvestmentfundsandforeigninstitutionalinvestorsmayelecttobetaxedonthebasisofthenetresultsderivedfromtheirinvestmentsactivitiesinChileata10%rateuponremittance.Special requirementshave tobemet toopt for this regime. Inaddition,a localmanagementcompanyorlocalrepresentativeisrequired.Thecapitalgainstaxexemptiondiscussedinnote(�)aboveapplieswithoutregardtothisspecialregime.Thisregimeappliesnotonlytodividendsandinterestderivedfrominvestmentsinsharesorsecurities,butalsoonanygainobtainedbythefundfromitsauthorizedinvestments.

120

Withholding Tax Rates

Applicable to Luxembourg UCIs Appendix I

Country of investment

Type of income

Interest Capital gains on sale of

securities %�Dividends %�Corporate bonds

%�Government

bonds %�

China 10(1)(2)(�) 10(1) 0(1) 0(4)(5)(6)

Colombia 0(1) �5 0(2) 0(�)

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China, People’s Republic of (PRC)

(1) LuxembourgSICAVsandSICAFsqualify for theapplicationof theDoubleTaxationTreatyconcludedbetweenLuxembourgandthePRC.Thetreatyrateondividendsis10%(5%iftheholdingisatleast25%).Thetreatyrateandnormalrateoninterestfromcorporatebondsis10%.Interestfrombondswhichareguaranteed,insuredorindirectlyfinancedbytheLuxembourgGovernmentareexemptfromPRCwithholdingtax.

(2) Dividends received from a foreign investment enterprise (“FIE”) will be exempt from PRCwithholdingtax.APRCcompanywillgenerallyberegardedasanFIEifitisnotlessthan25%ownedbyforeigninvestors.However,dividendwithholdingtaxat20%hasbeenre-introducedunderthenewPRCcorporateincometax(CIT)Lawwithpossiblereductionto10%.ThenewCITLawwillcomeintoeffectfrom1January2008.

(�) DividendsreceivedbyforeigninvestorsfromaPRCcompany’s“Bshares”listedonarecognizedstockexchangeinChinaorfromthePRCcompany’s“overseas”shareslistedonanoverseasrecognizedexchangewillbeexemptfromPRCwithholdingtax.Thisexemptionwillnolongerbevalidfrom1January2008withthecomingintoeffectofthenewCITLaw.

(4) GainsonsaleofaPRCcompany’s“Bshares”listedonarecognizedstockexchangeinChinaandgainsonsaleofaPRCcompany’soverseasshareslistedonanoverseasrecognizedstockexchangeareexemptfromPRCwithholdingtax.Thisexemptionwillnolongerbevalidfrom1January2008withthecomingintoeffectofthenewCITLaw.

(5) According to the Double Taxation Treaty between PRC and Luxembourg, gains on equitydisposalofaPRCcompany,thepropertyofwhichprincipallyconsistsdirectlyorindirectlyofimmovablepropertywillbesubjecttoPRCwithholdingtax.Thewithholdingtaxrateis10%under theexistingCITLaw.However, the ratewillbe20%under thenewCITLawwithapossiblereductionto10%.

(6) AccordingtotheTaxTreatybetweenPRCandLuxembourg,gainsonequitydisposalofaPRCcompanywillbesubjecttoPRCwithholdingtaxgiventhedisposedequityconstitutesmorethan25%ofthecompany’stotalequity.Thewithholdingtaxrateis10%undertheexistingCITLaw.However,theratewillbe20%underthenewCITLawwithapossiblereductionto10%.

Colombia (1) Arateof�4%for2007or��%for2008andfurtheryearsappliesifthecompanypayingthedividendhasnotpaidincometaxatthecorporatelevel.

(2) Generally,interestonGovernmentbondsisnotsubjecttowithholdingtax.However,eachcaseshouldbereviewedseparately.Forsometypesofdebtnotes,thewithholdingtaxrateis7%;thiswithholdingisappliedonceinterestispaid.Thiswithholdingtaxmaybediscountedagainstthe�4%generalincometaxapplicableforforeigninvestmentfunds.

(�) No taxable gain shall be recognized if shares, listed on Colombian stock exchanges, aretransferred by one shareholder (real beneficiary) and the shares transferred do not representmorethan10%ofthetotalcompany’ssharesinthesamefiscalyear.Gainsderivedfromthesaleofbondsinasecondarymarketareconsideredasinterest(seenote(2)).

122

Withholding Tax Rates

Applicable to Luxembourg UCIs Appendix I

Country of investment

Type of income

Interest Capital gains on sale of

securities %�Dividends %�Corporate bonds

%�Government

bonds %�

Costa Rica 15(1)(4) 15(4)(5) 15(2)(4) 0or�0(�)(4)

Croatia 0(1) 0 0 0(2)

Cyprus 0 0 0 0

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Costa Rica (1) Thegeneralwithholdingtaxrateondividendspaidtonon-residentsis15%.TheCostaRicanIncomeTaxLaw(ITL)providesa5%withholdingtaxondividendsderivedfromstockdealtinonalocalstockexchange.

(2) Thegeneralwithholdingtaxrateoninterestpaymentstonon-residentsis15%.TheCostaRicanITLprovidesareduced8%withholdingtaxongovernmentbondsregisteredonalocalstockexchangeandnowithholdingtaxongovernmentbondsissuedinforeigncurrency.However,the8%reducedrateonlyappliestodomiciledentitiesorpersonsresidentinCostaRica.Therefore,interest payments to non-residents derived from government bonds should be subject to thegeneral15%withholdingtax,exceptforbondsissuedbythegovernmentinforeigncurrency,whicharenotsubjecttotax.

(�) Capitalgainsaretaxableiftheyareoriginatedfromthetransferofdepreciableassets,forahigheramountthanthatstatedintheaccountingrecords,accordingtotherulesofdepreciation;orfromthesaleofnon-depreciableassetsintheordinarycourseofatradeorbusiness.Accordingly,ifanentity’smaintradeorbusinessissellingsecurities,anyincomederivedtherefrom,wouldbesubjecttoincometax.

(4) AtaxreformiscurrentlybeingdiscussedintheCostaRicanCongress;howevercurrentlythereis no certainty as to whether the tax treatment for dividends, interests, or any other type ofpassiveincomeisgoingtobeamendedbytheproposedtaxreform.

(5) Thegeneralwithholdingtaxrateoninterestpaymentstonon-residentsis15%.However,theCostaRican ITLprovides a reduced8%withholding taxon interest paymentsderived fromcorporate bonds dealt on a local stock exchange or if the bonds were issued by a qualifiedfinancialinstitution.However,thisreducedrateonlyappliestodomiciledentitiesorpersons.Therefore,interestpaymentstonon-residentsderivedfromcorporatebondsdealtinonalocalstockexchangeshouldbesubjecttothegeneral15%withholdingtax.

Croatia (1) WithholdingtaxondividendsisnolongerpayableinCroatiasince1January2005.Althoughthefirstinterpretationwasthattheexemptiondoesnotrelatetodividendspaidoutofprofitsrealizedintheperiodfrom2001to2004,thecorporateincometaxlegislationwasamendedinAugust2005sothattheexemptionrelatestoalldividendspaidafter1January2005regardlessoftheperiodinwhichtheywereearned(e.g.thedividendpaidin2005outofprofitsearnedin2002isalsonottaxableinlinewiththeamendedcorporateincometaxlegislation).

(2) There isnoseparatecapitalgains tax inCroatia.CapitalgainsearnedbyCroatiancorporateincometaxpayersfromsaleofsecuritiesaresubjectto20%corporateincometax.However,incaseanentityrealisingcapitalgainsinCroatiadoesnothaveataxablepresenceinCroatia(i.e.isnotregisteredascorporateincometaxpayerinCroatia),suchcapitalgainswouldnotbetaxedinCroatia.

124

Withholding Tax Rates

Applicable to Luxembourg UCIs Appendix I

Country of investment

Type of income

Interest Capital gains on sale of

securities %�Dividends %�Corporate bonds

%�Government

bonds %�

Czech Republic 15 25/15/0(1) 25/15/0(2) 0(�)

Denmark 28(1) 0 0 0

Dominican Republic 29(1) 29or10(�) 29or0(4) 29or0(2)

Ecuador 0 25 0 25(1)

Egypt 0 20(1) 20(1) 0

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Czech Republic

(1) Awithholdingtaxrateof15%appliestocorporatebondsissuedonorafter1January1998,arateof25%appliestocorporatebondsissuedbefore1January1998.Interestfrommortgagebondsissuedafter1January1995isexemptfromwithholdingtax.Interestfrommortgagebondsissuedasof1January2006isexemptonlywhenproceedsfrommortgagebondsareusedsolelyforprovidingloansforhousingpurposes(theprospectusmustincludeobligationoftheissuertocomplywiththisrule).

(2) Awithholdingtaxrateof15%appliestogovernmentbondsissuedonorafter1January1998,arateof25%appliestogovernmentbondsissuedfrom1January1997to�1December1997anda0%rateappliestogovernmentbondsissuedbefore1January1997.

(�) Capitalgainarisingfromthesaleofshares,participationinaCzechlegalentityotherthanajointstockcompany(“participation”)orbondsissubjecttotaxationintheCzechRepublicprovidedthat the investment instruments are sold to Czech tax resident or to the Czech permanentestablishmentofaCzechtaxnon-resident.IfthecapitalgainissubjecttotaxationintheCzechRepublic,thepurchaserisobligedtowithholdataxsecurityattherateof10%inthecaseofparticipation and of 1% in other cases. Nevertheless, as of 1 January 2004 such security isnotrequiredtowardsEUtaxresidents.SincethistermisnotdefinedintheCzechlegislation,itmightbearguablewhetherthisappliestoinvestmentcompaniesandmutualfundsaswell.BasedontheECtreaty,itcanbearguedthattheexemptionfromthetaxsecuritywithholdingobligation shall be applicable in these cases, however, the practical approach of the CzechFinancialAuthoritiesisnotyetknown.

Denmark (1) Byexchangeofletterson�0December2005and15February2006theDanishandLuxembourgtaxauthoritieshaveagreedthatLuxembourgSICAVsandSICAFsarecoveredbytheDoubleTaxationTreaty(DTT)betweenDenmarkandLuxembourg.Thelocaltaxauthoritieswillinthefutureissueacertificateofresidenceforproof.

Thegeneralwithholdingtaxrateisstill28%ondividends,butastherateaccordingtotheDTTis15%,SICAVsandSICAFsmayreclaim1�%.

FCPsareconsideredtransparentandtheycanasaresultnotobtaintreatybenefits.

Dominican Republic

(1) Thepayercanusethe29%withholdingtaxasacredittooffsetagainstitsowncorporateincometax.

(2) CapitalgainsderivedfromthetransferofGovernmentbondsissuedunderSection11ofLawNo.104-99andSection9ofLaw172-0�shouldnotbesubjecttotaxation.Capitalgainsderivedfromothersecuritiesshouldbesubjectto29%tax.

(�) The ordinary withholding tax rate on interest paid to non-residents is 29%; however, if theinterestispaidtoaforeignbankorfinancialinstitution,areduced10%withholdingtaxratemayapply.

(4) InterestderivedfromGovernmentbondsissuedunderSection11ofLawNo.104-99andSection9ofLaw172-0�shouldnotbesubjecttowithholdingtax.Interestpaidabroadderivedfromothergovernmentbondsshouldbesubjecttothegeneral29%withholdingrate.

Ecuador (1) Theoccasionalsaleofsecuritiesisnotsubjecttotax.

Egypt (1) ThefollowingGovernmentbondstaxareexemptedfromwithholdingtax:TreasurybillsGovernmentbondsspecificallyexempted.

••

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Withholding Tax Rates

Applicable to Luxembourg UCIs Appendix I

Country of investment

Type of income

Interest Capital gains on sale of

securities %�Dividends %�Corporate bonds

%�Government

bonds %�

Estonia 22/0(1) 0(2) 0(2) 0(�)

Ethiopia 10 10(1) 0 �0

Fiji 0(1) 10 10 0

Finland 15(1) 0 0 0

France 25 0(1) 0(2) 0(�)

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Estonia (1) Awithholdingtaxrateof0%ondividendsappliesincasethefund[orthefundmanager(i.e.alegalpersonadministeringthefund)incaseofamutualfund]ownsatleast15%ofthesharesintheEstoniancompany.22%withholdingtaxappliesinallothercases(thetaxratehasbeenreducedfrom2�%to22%sinceJanuary2007).

(2) Since1May2004thereisnoincometaxoninterestpaymentstonon-residentsifthepaidinterestdoesnotsignificantlyexceedtheamountofinterestpayableaccordingtomarketconditionsonthe similardebtobligations.Since January2007 thewithholding tax rateappliedon interestamountsexceedingthefairmarketinteresthasbeendecreasedfrom2�%to22%.

(�) Since1 January2007 therehavebeen somechanges in taxationofgainsderivedby anon-residentfromtransferofsecuritiesinEstonia.Incometaxischargedifthetransferredholdingisaholdinginacompany,contractualinvestmentfundorotherpoolofassetsofwhoseproperty,atthetimeofthetransferorduringaperiodwithintwoyearsbeforetransfer,morethan50%wasdirectlyorindirectlymadeupofimmovablesorstructuresasmovableslocatedinEstoniaandinwhichthenon-residenthadaholdingofatleast10%atthetimeoftransfer.Pleasenotethat22%corporateincometaxisapplicableasfrom1January2007(furtherreductionsareforeseenasfollows:21%in2008and20%in2009).

Ethiopia (1) There is no separate provision for corporate bonds. Assuming it will be considered as aninvestmentreturnandhenceasadividend,itwillmostlikelybetaxedatarateof10%.

Fiji (1) Awithholdingtaxrateof15%ondividendsapplieswheretheentiredividendorpartthereofispaidoutofincomeuponwhichnotaxhasbeenpaid;otherwisedividendspaidoutofcapitalgainsand/orincomewhichhasbeenchargedtotaxareexempt.

Finland (1) Luxembourg SICAVs and SICAFs should qualify for the Double Taxation Treaty (DTT)concludedbetweenFinlandandLuxembourg.Thewithholding taxrate is thenreducedfrom28%(applicablefrom1January2005)to15%(reductionorrefundformsaretobesubmitted).Inprinciple,the28%withholdingtaxrateappliestoFCPsunlesstheunitholdersthemselvesareabletoclaimthereducedrateundertheDTT.

TheFinnishSupremeAdministrativeCourthasconfirmedinruling(KHO22.11.2004T��45)thatSICAVs(Sociétéd’InvestissementàCapitalVariable)areentitledtotreatybenefitsandinruling(KHO22.11.2004T��59)thatFCPs(FondsCommundePlacement)aretreatedasflowthroughentities.Thus,accordingtothisruling,theunitholdersthemselvesareabletoclaimthereducedrateundertheDTTbetweenthesourcecountryandFinland.

Pleasenote, that if theunitholderofanFCPisaresidentofFinlandandFinlandisalsothesource state, dividends, interest and capital gains will be taxed in Finland according to theFinnishdomesticlegislation.

France (1) Wheretherecipientisanon-Frenchresident,a0%withholdingtaxrateappliestointerestoncorporate bonds issued on or after 1 January 1987 to the extent thebeneficial owner of theinterestincomeprovidestheFrenchpayingagentwithacertificateofresidenceatthetimeofthepayments.

(2) Wheretherecipientisanon-Frenchresident,a0%withholdingtaxrateappliestointerestfromFrenchgovernmentbondsissuedonorafter1January1987totheextentthebeneficialowneroftheinterestincomeprovidestheFrenchpayingagentwithacertificateofresidenceatthetimeofthepayments.

(�) CapitalgainsrealizeduponthedisposalofsharesinaFrenchcompany,wheretheLuxembourgfundholdsdirectlyorindirectlymorethan25%oftherightstotheprofits,aresubjecttoa16%withholdingtax.

128

Withholding Tax Rates

Applicable to Luxembourg UCIs Appendix I

Country of investment

Type of income

Interest Capital gains on sale of

securities %�Dividends %�Corporate bonds

%�Government

bonds %�

Gabon 20 20(1) 20(1) 0

Germany 15(1) 0 0 0

Ghana 8 10 10 0(1)

Greece 0 0 0 0(1)

Guam �0 �0(1) �0 0

Guatemala 0(1) 10 10(2) 10/�1(�)

Guernsey 0 0 N/A 0

Guinea 15 15 15 �5

Hong Kong 0 0 0 0

Hungary 0(1)(2) 0 0 0

Iceland 15 0(1) 0(1) 0

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Gabon (1) Thewithholdingtaxrateis�0%for“lots”.

Germany (1) LuxembourgSICAVsandSICAFs shouldqualify for theDoubleTaxationTreaty concludedbetweenGermanyandLuxembourg.Thewithholdingtaxrateisreducedfrom21.1%to15%(reductionor refundformsare tobesubmitted). Inprinciple the21.1%rateapplies toFCPsunlesstheunitholdersthemselvesareabletoclaimthereducedrateundertheDoubleTaxationTreaty.

Ghana (1) A0%withholdingtaxrateappliestosecuritiessoldontheGhanaStockExchange.Otherwisethewithholdingtaxrateis5%.

Greece (1) A0%withholdingtaxrateappliesifsecuritiesarelistedonthestockexchange,althoughthereisa0.15%(i.e.halfoftheprevious0.�%)taxonthetotalsalevalue.Theaforementionedreducedrateappliestosaleseffectedafter1January2005.Otherwisethereisataxof5%ontherealvalueoftheshares.

Guam (1) Interestoncertainportfoliodebtbondsissuedafter18July1984isexempt.

Guatemala (1) A10%withholdingtaxrateappliesifthecompanypayingthedividendhasnotpaidincometax.

(2) Thistaxationappliesinprinciple.However,theGovernmentisusedtoexpresslyissuebondsexemptfromapplicabletaxes.

(�) Theratedependsonthetaxregimeselectedbythetaxpayer.

Hungary (1) Asof1January2006,Hungarydoesnotlevywithholdingtaxonanykindofpaymentsmadetoforeignentities(exceptpaymentstoindividuals).Consequently,thereisnowithholdingtaxliabilityondividendspaidtoaLuxembourgfund.

(2) Hungariandividendwithholdingtaxonpaymentstonon-individualshare-holderswasabolishedfrom1January2006.Forfundsoperatingasapartnership(orinanyothernon-corporateform),further analysis should be carried out to confirm that from a Hungarian tax perspective thefund is not viewedas transparent and thedividend is not regarded aspaid to the individualshareholdersofthefunds.

Iceland (1) Interestpaid tonon-residents isnotsubject towithholding tax.However,non-residentsmustapplytothelocaltaxcommissionertobenefitfromthistaxexemption.

1�0

Withholding Tax Rates

Applicable to Luxembourg UCIs Appendix I

Country of investment

Type of income

Interest Capital gains on sale of

securities %�Dividends %�Corporate bonds %�

Government bonds %�

India 0(1)(2)(�) (1)(4)(6)(7) (1)(4)(6)(7) (1)(5)(6)(7)

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India (1) Foreign investment funds usually invest in India under the portfolio investment scheme asForeign Institutional Investors (“FII”). However, investments may also be made under theForeignDirectInvestmentroutesubjecttotheregulationsprescribedinthisregard.

(2) Inrespectoffinancialyear2006-2007,dividendsdeclared,distributedorpaidareexemptfromtaxinthehandsoftheshareholderrecipient.However,ataxof14.025%(baserateof12.5%plussurchargeof10%andeducationcessof2%)ispayablebythedomesticcompanyondistributedprofits.Inrespectoffinancialyear2007-2008,theFinanceBill,2007proposestoincreasethistaxto16.995%(baserateof15%plussurchargeof10%andeducationcessof�%)onsuchdistributedprofits.

(�) Similartodividends,incomereceivedinrespectofunitsofIndianmutualfundsortheUnitTrustofIndiaisexemptfromtaxinthehandsoftherecipient.However,inrespectofschemesotherthanopenendedequityorientedschemes(i.e.suchfundsthat investmorethan65%of theirinvestiblefundsinequitysharesofdomesticcompanies),themutualfundisliabletopaytaxonincomedistributionsasfollows:

(i) For the financialyear2006-2007, in respectof incomedistributionmade to individualsoraHinduundividedfamily,themutualfundisliabletopaytaxof14.025%(baserateof12.5%plussurchargeof10%andeducationcessof2%).Inrespectoffinancialyear2007-2008,theFinanceBill2007proposestoincreasethistaxto16.995%(baserateof15%plussurchargeof10%andeducationcessof�%).

(ii) For the financial year 2006-2007, in respect of income distribution made to any otherperson,themutualfundisliabletopaytaxof22.44%(baserateof20%plussurchargeof10%andeducationcessof2%).Inrespectoffinancialyear2007-2008,theFinanceBill2007proposestoincreasethistaxto22.66%(baserateof20%plussurchargeof10%andeducationcessof�%).

Also,theFinanceBill2007proposestoincreasethetaxrateto28.�25%(baserateof25%plussurchargeof10%andeducationcessof�%)fromtheexisting22.44%(applicableforfinancialyear2006-2007)onincomedistributionmadebyamoneymarketmutualfundoraliquidfundapplicableforfinancialyear2007-2008.

However,openendedequityorientedfundsareexemptedfrompaymentoftaxonincomedistributions.

(4) Forthefinancialyear2006-2007,interestoncorporatebondsissuedinaccordancewithaschemenotifiedbytheCentralGovernmentistaxableat10.455%inrespectofcorporateinvestors(baserateof10%includingsurchargeof2.5%andeducationcessof2%)andat11.22%inrespectofnon-corporateinvestors(baserateof10%plussurchargeof10%andeducationcessof2%).Inrespectoffinancialyear2007-2008,theFinanceBill2007proposestorevisethistaxrateto10.5575%inrespectofcorporateinvestorsandto11.��%inrespectofnon-corporateinvestors.At present the scheme notified by the Central Government for this purpose is the ForeignCurrency Convertible Bonds and Ordinary Shares (through Depository Receipt Mechanism)Scheme. Interest received on corporate bonds other than those mentioned above is taxed at20.91%(proposed tobe increased to21.115%byFinanceBill2007) in respectofcorporateinvestorsandat22.44%(proposedtobeincreasedto22.66%byFinanceBill2007)inrespectofnon-corporateinvestors.Theratesmentionedareinclusiveofsurchargeandeducationcess.

1�2

Withholding Tax Rates

Applicable to Luxembourg UCIs Appendix I

Country of investment

Type of income

Interest Capital gains on sale of

securities %�Dividends %�Corporate bonds

%�Government

bonds %�

India 0(1)(2)(�) (1)(4)(6)(7) (1)(4)(6)(7) (1)(5)(6)(7)

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India (continued)

(5) Thefollowingtaxratesareapplicableforcapitalgainsearnedonsaleofsecurities:

Note: Theabove ratesare inclusiveof surchargeof2.5%andeducationcessof2%incaseofcorporate investorandsurchargeof10%andeducationcessof2%incaseofnon-corporateinvestorinrespectoffinancialyear2006-07.Inadditiontotheabove,theratesforthefinancialyear2007-08includeanadditionalSecondary&Highereducationcessof1%(acumulativeeducationcessof�%)proposedbyFinanceBill2007.

TheFinanceAct2004introducedthelevyofaSecuritiesTransactionTax(STT)onthevalueoftransactionsinrespectofspecifiedsecurities.TheexistingratesofSTTasincreasedbytheFinanceAct,2006areasfollows:

Particulars STT to be collected from STT (%) 1 June 2006 onwards

Units of Equity Oriented Mutual Funds Seller 0.25

Delivery based transaction in equity shares or units of equity oriented fund (Buyer and Seller each to pay 0.125 % STT)

Seller and Buyer 0.125

Non delivery based transaction in equity shares or units of equity oriented fund

Seller 0.025

Derivatives (including futures & options) Seller 0.017

(6) Surchargeinrespectofnon-corporateinvestorsisapplicableonlyifthetotaltaxableincomeforaparticularyearexceedsRs1,000,000.

(7) In respect of financial year 2007-2008, the Finance Bill, 2007 has proposed to make thesurchargeforcompaniesapplicableonlyiftotaltaxableincomeforaparticularyearexceedsRs10,000,000.

Nature of security and period of holding FII NON-FII

CORPORATE / NON-CORPORATE CORPORATE / NON-CORPORATE

A)Securities sold on a recognized stock exchange

1. Capital gains earned on sale of securities held for more than 12 months before sale

Prescribed listed securities acquired on or after 1 March 2003 but prior to 1 March 2004Shares underlying GDRSecurities other than the above

•

••

0% ; 0%

0% ; 0%0% ; 0%

0% ; 0%

0% ; 0%0% ; 0%

2. Capital gains earned on sale of securities held for less than 12 months before sale

10.455% ; 11.22% Finance Bill 2007 – 10.5575% ; 11.33%

10.455% ; 11.22% Finance Bill 2007 – 10.5575% ; 11.33%

B)Securities sold otherwise than on a recognized stock exchange

1. Capital gains earned on sale of securities held for more than 12 months before sale

10.455% ; 11.22% Finance Bill 2007 – 10.5575%;11.33%

20.91% ; 22.44% Finance Bill 2007 – 21.115%; 22.66%

2. Capital gains earned on sale of securities held for less than 12 months before sale

31.365% / 33.66% Finance Bill 2007 – 31.6725%; 33.99%

41.82% / 33.66% Finance Bill 2007 –

42.23%; 33.99%

1�4

Withholding Tax Rates

Applicable to Luxembourg UCIs Appendix I

Country of investment

Type of income

Interest Capital gains on sale of

securities %�Dividends %�Corporate bonds

%�Government

bonds %�

Indonesia 15/10(1) 10(1) 10(1) 0(2)

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Indonesia (1) LuxembourgSICAVsandSICAFs shouldqualify for theDoubleTaxationTreaty concludedbetween Indonesia and Luxembourg.The withholding tax rate on dividends and interest onbondsisreducedfrom20%to15%and10%respectively,providedtheysubmittheoriginaltaxresidencycertificateissuedbytheLuxembourgtaxauthoritiesconfirmingtheirtaxresidencyinLuxembourgandtheyqualifyasthebeneficialowneroftheincome.

Withrespecttothebeneficialowner,theIndonesiantaxauthoritiesissuedarulinginJuly2005thatprovidesaninterpretationofthetermbeneficialowneras“therealowneroftheincomeintheformofdividend,interestandorroyalty,whethersuchownerisanindividualoracompany,whoisfullyentitledtodirectlyenjoythebenefitsofsuchincome”.Consequently,therulingindicatesthatspecialpurposevehiclesintheformof“conduitcompany”,“paperboxcompany”,“passthroughcompany”andothersimilartypesofcompaniesarenotincludedwithinthemeaningof“beneficialowner”.Therulinghasstatedthatpaymentsofdividends,interestorroyaltiestoanoffshoreentitywhichresidesinacountrythathasadoubletaxtreatywithIndonesia(i.e.treatycountry)willnotbeeligibleforthereducedtreatywithholdingtaxrateiftherecipientofsuchincomeisnotthebeneficialownerthereof.Ifthisisthecase,the20%withholdingtaxratefromgrossincomepaidwillapplyforanypaymentofdividends,interest,androyaltiesbyIndonesiantaxpayerstooffshoreparties,sincesuchoffshorepartiescannotbeconsideredasthe“beneficialowners”.

Whilst the legitimacyof theruling itself remainsunclearanddue to thefact that IndonesianTaxLawswerenotestablishedonabeneficialownerconcept,onemaytaketheviewthat,ifanentityisregisteredastheownerofthesharesandtheCertificateofTaxResidencyoftheentityisavailabletoconfirmthatitisataxresidentoftherespectivecountry,theentitycanbearguablyconsideredtohavetheentitlementtotherespectiveincome.Foranywithholdingtaxthatistobe imposed, theratewillbedeterminedbasedoncountryofresidencyof thatentityand thetaxtreatyIndonesiahaswiththecountry.Nevertheless,therulingofJuly2005representstheIndonesiantaxauthorities’formalinterpretationoftheterm“beneficialowner”thatwouldlikelybeappliedbythetaxofficesuntilfurtherrulingorregulationisreleased.

Furtherinternalclarificationwasprovidedearly2006bythetaxauthoritiesviaaletterreleasedon10February2006(S-95/PJ.�42/2006),whichprovidesfurthercriteriaforidentifyingbeneficialownershipoftheinterestandindicatescertainteststobetakeninidentifyingwhetheranentityisthebeneficialowneroftheinterestorsimplyapassthroughcompany.Thecriteriatodeterminewhetheraforeigncompanyreceivinginterestincomeisthebeneficialownerofthatincomeareasfollows:

whethertheforeigncompanywillbesubjecttotaxinitsowncountryofdomicile/residenceontheentireinterestincomereceivedfromthesourcecountry(i.e.Indonesia)thatwouldbeeligiblefortaxtreatybenefits,orwhethertheforeigncompanyhasanactivebusinessoperation,orwhethertheforeigncompanyhasfullrightsovertheentireinterestincomethatitreceivedfromthesourcecountrytofunditsbusinessoperation,orwhethertheforeigncompany’ssharesaretraded/listedonarecognizedstockexchange.

•

••

•

1�6

Withholding Tax Rates

Applicable to Luxembourg UCIs Appendix I

Country of investment

Type of income

Interest Capital gains on sale of

securities %�Dividends %�Corporate bonds

%�Government

bonds %�

Indonesia 15/10(1) 10(1) 10(1) 0(2)

Iran 0(1) 0 0 0(2)

Ireland 0(1) 0(2)(�) 0 0(4)

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Indonesia (continued)

Basedontheletter,thetaxauthoritiesappeartohavetakentheviewthataforeignentitymayqualifyasthe“beneficialowner”oftheincome,providedthatithasmettheabove“beneficialowner tests”.Although the letter is released fora specificcaseof the ruling, itwouldat theveryleastprovideahintoftheapproachthatthetaxauthoritieswouldtakeforothercasesinrespectofbeneficialowner.SupportingdocumentssatisfyinganyoftheabovebeneficialownertestsarethenrecommendedtobeobtainedandmaintainedbytheIndonesianentitypayingthedividend,interestand/orroyalty;theremightbeapotentialadversepositionifthedocumentsarenotavailable.Thesedocumentsmayalsoberequestedfromtheoverseaspartyreceivingtheincome(suchasSICAVs/SICAFs).Inaccordancewiththe2005taxrulingoutlinedabove,ifSICAVs/SICAFsdonotqualifyasundertheinterpretationofbeneficialowner,theIndonesia/Luxembourgtaxtreatywouldnotapplyandthe20%statutorywithholdingtaxratewillapply.

(2) IfsoldontheIndonesianstockexchangethereisataxonthesalepriceof0.5%onfoundingsharesand0.1%onallotherpubliclistedshares.ThesaleofnonlistedsharesofanIndonesiancompanybyanon-residentissubjecttowithholdingtaxat5%ofgrosssalesprice.Thetaxwillbewithheldbythebuyer.Ifthetransactionsareexecutedbetweennonresidenttaxpayers,thetaxwillbewithheldbytheissuingcompanyitself.The5%withholdingtaxmaynotapplyiftheseller(SICAV/SICAF/FCPorunitholders)submitsanoriginaltaxresidencycertificateissuedbytheLuxembourgtaxauthorities.Pleaseseethecommentsonbeneficialownerconceptabove.Itisindicatedthattheabovebeneficialownerinterpretationappliestoincomeintheformofinterest/royalty/dividend.Although, the interpretationdoesnotexplicitly includecapitalgainincome,theremaybeapotentialissuethatasimilarapproachisconsidered.

Iran (1) Aftera25%corporationtaxthereisnofurthertaxontheprofitaftertax,whetherdistributedornot.

(2) Thereisataxof0.5%onthetransactionvalueforquotedsharesand4%onthenominalvalueforunquotedshares.

Ireland (1) 0%taxwithheldforbothSICAVsandSICAFs(andinpracticeforFCPsalso),if:(i) thefundisresidentfortaxpurposesinLuxembourg(certificateoftaxresidencefromthe

LuxembourgFinanceMinistryrequired)andnotunderthecontrolofIrishresidents,or(ii) thefundisultimatelycontrolledbypersonsresidentinanEUMemberStateorcountrywith

whichIrelandhasadoubletaxtreaty(RelevantTerritory),or(iii) theprincipalclassofsharesofthefundissubstantiallyandregularlytradedonarecognized

stockexchangeinaRelevantTerritory.

Appropriatedocumentationincludingauditors’certificatemustbeinplacebeforethedividendispaid.

Eveniftheaboveconditionsarenotmet,SICAVsandSICAFs(andinpracticeFCPs)maybeabletoreclaimtaxwithheld,undertheIreland/Luxembourgtreaty(filingofform,whichincludescertificateoftaxresidence,required).

(2) Thefollowingareexemptfromwithholdingtax:(i) interestonquotedEurobonds(ii) interestonbondsissuedundertheauthorityoftheMinisterforFinancewiththecondition

thatinterestbepaidwithoutdeductionoftax(iii) interest paid by a company or an Irish domiciled collective investment scheme, in the

ordinarycourseofitstradeorbusiness,toacompanyresidentinaRelevantTerritory.

(�) UndertheDoubleTaxationTreatybetweenIrelandandLuxembourgthewithholdingtaxrateoninterestis0%(filingofform,whichincludescertificateoftaxresidence,requiredinordertoobtainupfrontexemption).

(4) Gainsarisingonsaleofunquotedsharesincompaniesthatderivethegreaterpartoftheirvaluefromimmovable property in Ireland are subject to 15% tax where the sales consideration exceeds €500,000.

1�8

Withholding Tax Rates

Applicable to Luxembourg UCIs Appendix I

Country of investment

Type of income

Interest Capital gains on sale of

securities %�Dividends %�Corporate bonds

%�Government

bonds %�

Isle of Man 0(1) 0(2) 0(2) 0

Israel 20/25(1) 20/25/27(2) 0/20/25(2) 0/20/25(�)

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Isle of Man (1) Since6April2006,thestandardrateofincometaxforcompaniesintheIsleofManis0%.Thestandardrateisgenerallyapplicabletoallformsofincomereceivedbyallcompanieswiththeexceptionofincomefrombankingbusinessandlandandproperty,bothofwhicharetaxableat10%.Inthetaxyear2006/07(6April2006–5April2007)dividendspaidfromincomesubjecttotaxat10%suffera10%withholdingtaxwhentherecipientisanonresidentcompanyorindividual.From6April2007,nowithholdingtaxesapplytoanydividends.

(2) Nowithholdingtaxesapplytointerestpaymentssince6April2006.

Israel (1) Awithholding tax rate of 20%applies to distributionof dividends to a personwhich is nottreated as a ‘significant shareholder’ (a ‘significant shareholder’ is a person who directly orindirectly,aloneorwithanother,holdsat least10%ofanymeansofcontrolofacompany).Dividendsaresubjecttowithholdingtaxof0%,4%or15%iftheyarepaidoutoftheprofitsofa“privilegedenterprise”oran“approvedenterprise”oran“approvedproperty”pursuanttotheLawfortheEncouragementofCapitalInvestments,1959.

(2) Awithholdingtaxrateof20%appliestoindividualsinvestinginthefundandarateof25%-29%applies(in2007)toentities.Notethat,incertaincircumstances,areductionmaybeprovidedto government interest paid to foreign residents if the interest income is not attributed to apermanentestablishmentthathehasinIsrael.

(�) Awithholdingtaxrateof0%appliestolistedsecuritiestradedinIsrael,andheldbyforeignresidents.Capitalgainstaxrateonunlistedsecuritiesis20%/25%(dependingonownership)ifheldbyaresidentofacountrywithwhichIsraelhasnodoubletaxationtreatyand0%ifheldforatleast10yearsbyaresidentofacountrywhichhasadoubletaxationtreatywithIsrael(e.g.Luxembourg)ifcertainconditionsaremet.

140

Withholding Tax Rates

Applicable to Luxembourg UCIs Appendix I

Country of investment

Type of income

Interest Capital gains on sale of

securities %�Dividends %�Corporate bonds

%�Government

bonds %�

Italy 27(1) 0(2) 0(�) 0(4)

Jamaica ��.��(1) ��.�� ��.��(2) 0(�)

Japan 7(1) 15 0(2) 0(�)

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Italy (1) Thewithholdingtaxrateondividendspaidtoanon-residentinvestoris27%forordinarysharesand12.5%forcapitalizationshares(Risparmio–RMC).AsSICAVs/SICAFsarenotsubjecttoincometax,thetreatyrateof15%wouldnormallynotbeapplicabletoordinaryshares.

(2) The exemption applies only with respect to interest on bonds issued by banks and listedcompanieswitharemainingmaturityofmorethan18monthspaidtoforeigninvestorsresidentincountriesallowinganadequateexchangeofinformationwithItaly.

SinceLuxembourgisoneofthesecountries,theLuxembourgfundmustprovidethefinancialintermediarypayingtheincomewithaself-certificationofresidence,inordertobenefitfromtheexemption.Ifthefunddoesnotsubmitthiscertificateofresidence,thewithholdingtaxoninterestwillbeattherateof12.5%.Ifthebondshaveamaturityattheirissuedateoflessthan18months,thewithholdingtaxrateof27%willapply.

(�) TheexemptionappliesonlyiftheLuxembourgfundprovidesaself-certificationofresidencetothefinancialintermediarypayingtheincome.Ifthecertificationisnotprovidedthewithholdingtaxoninterestwillbeattherateof12.5%.

(4) Gainsderivedbyanon-residentfromthedisposalofshareslistedeitherinanItalianorforeignstockexchangeandwhichdonotrepresentaqualifiedparticipation(i.e.lessthan2%ofvotingrightsor5%ofsharecapital)areoutofthescopeoftaxationinItaly.Accordingly,capitalgainswillbeexemptfromwithholdingtaxinItaly,iftheLuxembourgfundprovidesproofthatitisnotresidentinItaly.

Gainsfromthedisposalofunlistedsharesnotrepresentingaqualifiedparticipation(i.e.lessthan20%ofthevotingrightsorlessthan25%ofthecapitalofanonstock-exchange-listedcompany)areexemptfromtaxationinItalyifderivedbyforeigninvestorsresidentincountriesallowinganadequateexchangeofinformationwithItaly.SinceLuxembourgisoneofthesecountries,inorder tobenefit from the exemption, theLuxembourg fund submits a self-certificationofresidencetothefinancialintermediarypayingtheincome.

Inbothdescribedcasesacapitalgaintaxatarateof12.5%appliesifthefunddoesnotprovidetherequireddocumentation.

Capital gains derived from the disposal of shares that represent a qualified participation aresubjecttotaxationattheordinary��%corporatetaxrateon40%oftheamount.

Jamaica (1) The withholding tax rate is currently ��.��%; however, where the dividend derives from acompanywhichislistedontheJamaicaStockExchange,theapplicablerateis0%.

(2) CertainGovernmentbondsarenotsubject towithholdingtaxoninterestbut thesebondsarespecificallystatedasbeingtax-freewhenissued.

(�) Jamaicadoesnothaveacapitalgainstax.Thereis,howeveratransfertaxof7.5%andastampdutyof1%thatisgenerallyappliedtothetransferofsecurities(notincludingsecuritiesissuedbytheGovernmentofJamaica)heldinaJamaicancompany.

Japan (1) Thewithholdingtaxrateondividendsfromlistedsharesis7%upto�1March2008afterwhichdatea15%ratewillapply.Thewithholdingtaxrateapplicabletounlistedsharesis20%.

(2) Arateof0%appliesifcertainconditionsaremet.

(�) Foreigncorporationsarenottaxedoncapitalgainsfromthesaleofsharesunlessthegainisderived from transfer of shares similar to a transfer of business. In addition to this, since 1April2005,capitalgainsderivedbynon-residentsorforeigncorporationsfromthesaleofstockorother comparable rights ina companywhichderivesat least50%of itsvaluedirectlyorindirectlyfromrealpropertyinJapanwillbesubjecttoJapanesetax(ascomparedto0%taxoncapitalgainsonsecurities,asdescribedabove).

142

Withholding Tax Rates

Applicable to Luxembourg UCIs Appendix I

Country of investment

Type of income

Interest Capital gains on sale of

securities %�Dividends %�Corporate bonds

%�Government

bonds %�

Jersey 0(1) 0 N/A 0

Jordan 0 0 0 0

Kazakhstan 15 15(1) 0 0(2)

Kenya 10 15 15(1) 0

Korea 27.5(1) 27.5(1)(2) 27.5(1)(2) 0(1)(2)(�)

Kuwait 0(1) 0(2) 0(2) 0(2)

Latvia 10(1) 0 0 0

Lebanon 10 5 5 10

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Jersey (1) A0%withholdingtaxrateappliesto“exempt”Jerseycompanies(whichpaytaxonlyontheirJerseysourceincomeexcludingbankinterest).Otherwisedividendsaredeemedtobepaidnetof20%tax.

Kazakhstan (1) Theamountofaccumulated(accrued)interestondebtsecuritiespaidbyaresidentbuyertoanon-residentuponpurchaseisexemptfromwithholdingtaxasitisinterestondebtsecuritiespurchasedonthespecialtradingflooroftheregionalfinancialcentreforthecityofAlmaty.

(2) Incomefromcapitalgainsfollowingasale(a)madeatopentradingonastockexchangetradingstocksandbonds,whichonthedayoftradingareinthehighestorsecondhighestofficialstockexchangelistings;or(b)ofGovernment(state)securitiesandagencybonds,arenotsubjecttotaxation.Incomefromcapitalgainsfollowingthesaleofothersecurities that isclassifiedasKazakhsourceincomeissubjecttocorporateincometaxat20%thatispaidindependentlybythenon-residentrecipientoftheincome.

Kenya (1) Thegovernmentbondsandbillsaretaxableaspertheabovetable.Incertainrarecircumstances,thesebondsareexemptedfromtax–inwhichcasetheyareexemptedinwritingthroughnoticeinthegovernment’sofficialgazette.Currently,allbondsforinvestmentpurposesaretaxable.

Korea (1) Thewithholdingtaxrateshowninthetableof27.5%fordividendsandinterestisthenon-treatyrate.IfLuxembourgSICAVs,SICAFsandFCPsaretreatedasLuxembourgresidentsandthebeneficialownersoftheKoreansourceincomesuchasthedividends,interestandcapitalgains,thereducedwithholdingtaxratesondividendsandinterestof15%and10%,respectively,wouldapply,while thecapitalgainson saleof securities inKorea is exempt from thewithholdingtaxinKorea.However,iftheLuxembourgSICAVs,SICAFsandFCPsarenottreatedasthebeneficialownersoftheKoreansourceincome,theKoreataxtreatywiththecountrywheretherealbeneficialownerislocatedortheKoreandomestictaxlawfortheinvestorshavingnotaxtreatieswithKoreawouldapplyinaccordancewiththelook-throughruleinKorea.

(2) Foreign currency denominated bonds and securities issued by the Korean government andKorean domestic corporations are exempt from taxes on interest income and capital gains,respectively.Inthecaseofthetransferofsecuritiesotherthanequityshares,thecapitalgainsarenotsubjecttoKoreantaxunlesstheyaresoldtoaKoreanresident.

(�) A0%withholdingtaxrateappliestosecuritieslistedontheKoreanstockexchangeorKOSDAQprovidedthenon-residentcompanyanditsrelatedpartieshavenotowned25%ormoreoftheKoreancompany’sequityatanytimeduringtheyearofthesharetransferdateandthepreceding5calendaryearsandthesecuritiesaresoldontheKoreanstockexchangeorKOSDAQ.Otherwisethecapitalgainstaxisthelesserof27.5%ofthegainor11%ofthesalesprice,whilethecapitalgainstaxarisingfromtherealpropertyholdingcompanyinKoreaistaxedatthe27.5%ofthegain.Thereisatransfertaxof0.�%ofthetransferredpriceifsoldontheKoreanstockexchangeorKOSDAQand0.5%ifunlisted.

Kuwait (1) Thefund’sshareintheprofitsoftheinvesteecompanywillbesubjecttotaxinKuwait.

(2) Interest as well as capital gains from the disposal of securities may however be treated asbusinessincomeinKuwaitandthereforesubjecttotax.

Latvia (1) Awithholdingtaxrateof0%isapplicableforthedividendincomeifthebeneficialownerofthedividends(Luxembourgfund)issubjecttoincometaxinLuxembourgandholdsdirectlyatleast25%ofthecapitalandvotingrightsofthepayerofthedividends(Latviancompany)foratleast2subsequentyears.Incasea2-yearholdingperiodisnotfulfilled,abankguaranteeamountingto10%ofdividendsshallbesubmittedtotheLatviantaxauthoritiestoapplya0%withholdingtaxrate.

144

Withholding Tax Rates

Applicable to Luxembourg UCIs Appendix I

Country of investment

Type of income

Interest Capital gains on sale of

securities %�Dividends %�Corporate bonds

%�Government

bonds %�

Lesotho 25(1) 25(2) 25(2) 0(�)

Liechtenstein 4 4 4 0

Lithuania 15(1) 10(2) 10(�) 0

Luxembourg 15 0 0 0

Macau 0(1) N/A(1) N/A(1) 0(1)

Macedonia 10 10 10/0(1) 0(2)

Malawi 10 15 15 15(1)

Malaysia 0 10(1) 10(1) 0

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Lesotho (1) Dividendspaidbymanufacturingcompaniesareexemptfromwithholdingtax;inothercases,dividendsaresubjectto25%withholdingtax.Section10(2)oftheIncomeTaxOrderof199�states: “The special rate for manufacturing income applies to chargeable income, which isLesotho-sourceandisderivedfrommanufacturingbutdoesnotapplytoaLesothobranchofanon-residentcompany”.

(2) InterestreceivedbyataxpayerissubjecttowithholdingtaxunderSection107(1);a10%rateappliestoaresidenttaxpayerand25%ratetoanon-residenttaxpayer.

(�) ThereisnocapitalgainstaxinLesotho.Theproceedsorgainfromthedisposalofsharesistobeincludedinthetaxpayer’staxableincomeasperSection10�(1)(d)andwouldbetaxedatthemarginalrateofthetaxpayer.Pleasenotethatthetaxratesforcompanies,whichhavebeenamendedeffective1April2006,areasfollows:manufacturingconcerns10%,other25%.

Lithuania (1) Awithholdingtaxrateof0%applieswheretheholdingexceeds10%andisheldforatleast12months.

(2) Thebasicrateofwithholdingtaxoninterestis10%.Interestoncorporatebondsissuedbefore1January2002isexempt.

(�) Interestongovernmentbondsissubjecttoa10%withholdingtaxrate.IftheagreementsonthedistributionofGovernmentbondsareconcludedafter1January200�theinterestfromsuchsecuritiesisexempt.

Macau (1) Macaulawdoesnotcontainspecificmeasuresimposingwithholdingtaxoninterest,dividendsorcapitalgains.AcorporateentityissubjecttoincometaxinMacauonitsincomederivedfromitscommercialand industrialactivitiescarriedon inMacau.There isnodistinctionbetweenresidentsandnon-residentsfortaxpurposesinMacau.ShouldthesaleandpurchaseofsharesinMacaucompaniesconstitutecommercialorindustrialactivitiescarriedoninMacau,thefundwillbesubjecttoincometaxoncapitalgainarisinginMacauatprogressiveratesfrom�%to12%fortaxableprofitsbelowMOP�00,000andfixedrateof12%fortaxableprofitsexceedingMOP�00,000.Incometaxisimposedondividendsreceivedifdividendsarepaidoutofpre-taxprofits.

Macedonia (1) Zerorateisapplicableonlyifthefinancialinstitutions/consultants/banksareactingasagentsoftheGovernmentoftheRepublicofMacedonia.Inallothercasesthewithholdingtaxrateis10%.

(2) CapitalgainsarenotsubjecttoMacedonianwithholdingtax(i.e.incomefromcapitalgainisnotstipulatedwithintheincomesubjecttowithholdingtax).

Malawi (1) Only50%ofthegainfromthedisposalofsecuritiesistaxable.

Malaysia (1) Interest from certain specified bonds or securities may be exempt from tax.Also, generallyinterestderivedfromsecuritiesandbondsissuedorguaranteedbytheMalaysianGovernmentandreceivedbyaunittrustoralistedclosed-endfundisexemptedfromtax.Inapplyingthisexemption,theunittrustorthelistedclosed-endfundneednotbeincorporated,residentorlistedinMalaysia.

146

Withholding Tax Rates

Applicable to Luxembourg UCIs Appendix I

Country of investment

Type of income

Interest Capital gains on sale of

securities %�Dividends %�Corporate bonds

%�Government

bonds %�

Malta 0(1) 15(2) 15(�) 0(4)

Mauritius 0 0(1) 0(1) 0

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Malta (1) Maltaoperatesthefullimputationsystemwithrespecttothetaxationofdividends.ThetaxationofdividendsattheleveloftheshareholdermayalsovaryaccordingtowhethertheincomeoutofwhichthedividendsweredistributedwastaxedattheleveloftheMaltesecompany.

(i) Dividendsreceivedfromincomederivedfroma“participatingholding”.

When a Maltese company derives income from a “participating holding”, it is entitledin termsofArticle12(i)(u)of the IncomeTaxAct toopt for aparticipationexemption,inwhichcase the incomewillbeexemptfromtaxinMalta.Uponre-distributionof theexemptincome,bywayofdividends,thenon-residentshareholderwouldnotbesubjecttoanyfurthertaxinMalta(bywayofwithholdingorotherwise)onthedividendsreceived.

Alternatively, the Maltese company may opt to have its income derived from the“participatingholding”tobeallocateditsforeignincomeaccountandtaxedatthenormalcorporatetaxrateof�5%.Upontheredistributionoftheseprofitsallocatedtotheforeignincome account, the dividends will be subject to tax in the hands of the non-residentshareholder;however, thenon-residentshareholder receivesan imputationcredit for thetaxpaidontheprofitsoutofwhichthedividendsweredistributed.Accordingly,thefullimputationsystemensuresthattheshareholderwouldnotbesubjecttoanyfurthertaxonthedividendsreceived.Moreover,thenon-residentshareholdermayclaimafullrefundoftaxpaidbytheMaltesecompany.

(ii) Dividendsreceivedfromincomewhichwasnotderivedfroma“participatingholding”.

Anyincomewhichisnotderivedfroma“participatingholding”willbeallocatedtotheMaltesetaxedaccountorforeignincomeaccountandtaxedatthenormalcorporaterateof taxof�5%.Uponthedistributionofadividend, thenon-residentshareholderwillbesubjecttotaxonthedividendbutwill,receiveanimputationcreditforthetaxpaidbythecompanyontheprofitsoutofwhichthedividendsweredistributed.Theimputationsystem,againensuresthatnoadditionaltaxispaidonthedividendsreceivedbytheshareholder.Thenon-residentshareholdermayalsobeentitledtoclaimcertaintaxrefunds.Theamountof refunddependson the typeof incomederivedby theMaltesecompanyandwhetherdoubletaxreliefwasclaimedonthatincome.

(2) Interest,discountsorpremiumspayable in respectofapublic issuebyacompany,entityorother legal person howsoever constituted and whether resident in Malta or otherwise, and aprivateissuebyacompany,entityorotherlegalpersonhowsoeverconstitutedandresidentinMaltapaidtoacollectiveinvestmentschemelicensedintermsofMalteseInvestmentServicesLegislationissubjecttoaFinalWithholdingTax(“FWT”)of15%.

(�) Interest,discountsorpremiumspayablebytheGovernmentofMaltaorbyanyagencythereofaresubjecttoaFWTof15%.

(4) AnygainsorprofitsaccruingtoorderivedbyanypersonnotresidentinMalta,onadisposalofanyunitsinacollectiveinvestmentschemeasdefinedinArticle2oftheInvestmentServicesActandanyunitsandsimilarinstrumentsrelatingtolinkedlongtermbusinessofinsurance,includingthesurrenderormaturityoflinkedlongtermpoliciesofinsuranceandofanysharesorsecuritiesinacompany(whichfortheavoidanceofdoubtincludesredemption,liquidationorcancellation)whichisnotacompany,theassetsofwhichconsistwhollyorprincipallyofimmovablepropertysituatedinMalta,areexempt.

Mauritius (1) Therateof0%doesnotapplyiftherecipientoftheinterestisaninvestmentfundwithinthemeaningoftheActof20December2002.WheretheMauritianpayerholdseitheraCategory1GlobalBusinessLicenceoraCategory2GlobalBusinessLicencepursuanttotheFinancialServicesDevelopmentAct2001andtherecipientdoesnothaveaplaceofbusinessinMauritius,thenthe0%taxratewillapplyirrespectiveofthestatusofthenon-residentrecipient.

148

Withholding Tax Rates

Applicable to Luxembourg UCIs Appendix I

Country of investment

Type of income

Interest Capital gains on sale of

securities %�Dividends %�Corporate bonds

%�Government

bonds %�

Mexico 0(1)(2) 4.9(2)(�) 0 25(2)(4)

Moldova 10 10(1) 0(2) 10(�)

Monaco 0 0(1) N/A(1) 0

Morocco 10(1) 10 0 0

Mozambique 20 20 0 20

Namibia 10(1) 0 0 0

Netherlands 15 0(1) 0 0

Netherlands Antilles 0 0 0 0

New Zealand 15(1) 0(2) 0(2) 0(�)

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Mexico (1) There is no domestic withholding tax on dividends. A withholding tax is imposed on thedistributingcompanyifdividendsarepaidfromearningsthathavenotbeensubjecttotax.

(2) NotwithstandingtheDoubleTaxationTreatybetweenMexicoandLuxembourginforcesince2002,thetaxtreatybenefitsarenotapplicabletoLuxembourginvestmentfunds,sotheMexicanstatutorywithholdingtaxrateswillapplytopaymentsmadetosaidfunds.

(�) Thiswithholdingtaxratewillapplyifcertainrequirementsarefulfilled.Ifsuchrequirementsarenotmet,theratemaychange.

(4) Theapplicableratewouldbe25%ongrossproceedsor28%onnetproceeds.A40%capitalgainratecouldapply,iftheinvestmentfundisnotsubjecttotaxandtreatedasaninvestmentinalowtaxjurisdictionordeemedtobenefitfromaspecialregime.Furthermore,fortransfersofpubliclytradedsharesthroughastockexchange,thecapitalgainmaybeexempt.

Moldova (1) Interestoncorporatebondsisnottaxableuntil2010,providedthatthebondsareissuedforaperiodofmorethan�years.

(2) Interestonstatesecuritiesisnottaxableuntil1January2015.

(�) Capitalgainsfromthesaleofsecuritiesshouldbesubjecttoawithholdingtaxof10%onlyifthepurchaserisaMoldovanresident.

Monaco (1) MonacohasenteredintoatreatywiththeEuropeanUnion(“theSavingsDirective”)whichmay,incertaincircumstances,leadtoawithholdingtaxattherateof15%oninterestincome.IncomefromcorporatebondsandGovernmentbondsmaythereforebeliabletothistax.SICAVsandSICAFs,aslegalpersons,arealwaysexemptfromthiswithholdingtax.FCPsmightbeliabletothistax,dependingonthewayinterestincomeispaidtothefinalinvestor(ifthelatterisanindividualresidingintheEU).

Nowithholding taxwill apply inMonaco if the fundmanager or the custodianbankof theLuxembourgfundareregardedaspayingagents.

Morocco (1) AlthoughtheDoubleTaxationTreatyconcludedbetweenMoroccoandLuxembourgappliestoSICAVsandSICAFs,thewithholdingtaxrateondividendsisthesameasthenon-treatyrate.

Namibia (1) Dividendspaidoutofoilandgasprofitsareexemptfromwithholdingtax.

Netherlands (1) A25%withholdingtaxmaybeappliedifthecorporatebondqualifiesasahybridloan.

New Zealand (1) A15%withholdingtaxratewillapplywhereacompanypaysacashdividendwhichhasfullimputation,dividendwithholdingpaymentcreditsorconduittaxcreditsattached,ortotheextentimputation credits arepassedon to foreign investors through thepaymentof supplementarydividendsundertheforeigninvestortaxcreditregimeorthepaymentofadditionaldividendsundertheconduittaxreliefregime.A0%withholdingtaxrateappliestonon-cashdividendstotheextenttheyarefullyimputed.Otherwise,therateis�0%.

(2) A0%withholding tax rate applieswhere anApproved Issuerpays a levyof2%on interestpayments in respect of Registered Securities.All Government stock transactions have beenapprovedasRegisteredSecuritiesandtheReserveBankisanApprovedIssuer.Otherwise,therateis15%.

(�) Capital gains on the sale of bonds/shares are generally not taxable unless the investor isconsideredtobeinthebusinessofdealinginshares/bondsortheparticularbonds/shareswereacquiredwiththedominantpurposeofresale.

150

Withholding Tax Rates

Applicable to Luxembourg UCIs Appendix I

Country of investment

Type of income

Interest Capital gains on sale of

securities %�Dividends %�Corporate bonds

%�Government

bonds %�

Nicaragua 0(1) 0or22.5(�) 0 0or10.5(2)

Nigeria 10 10 0 0

Northern Mariana Islands

�0 �0 �0 0

Norway 25(1) 0 0 0

Oman 0 0 0 0

Pakistan 10 �0(1) �0(1) 0(2)

Palestine 8-16 8-16 8-16 8-16

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Nicaragua (1) A0%withholdingtaxrateappliesifthedividendispaidoutoftaxedincome.Otherwise,thewithholdingtaxrateis10.5%

(2) Thegeneralwithholdingtaxrateonremittancestonon-residentsis10.5%(i.e.remittancesthatarenotleviedwithaparticularwithholdingtaxrate).However,theNicaraguanFiscalEquityLawprovidesanexemptionforcapitalgainsderivedfromsecuritiesdealtinonalocalstockexchange.

(�) Thegeneralwithholdingtaxrateoninterestpaymentstonon-residentsis22.5%.However,theNicaraguanFiscalEquityLawprovidesanexemptionforlongtermfinancialinstruments(morethan4years)aswellasinterestandcapitalgainsderivedfromsecuritiesdealtinonalocalstockexchange.

Norway (1) BasedoninformationfromtheNorwayMinistryofFinance,aSICAVdoesnotqualifyfortheexemptionfromNorwegianWithholdingTaxondividendspaidfromNorwaytotheSICAV.TheMinistryarguesthataSICAVisatransparentvehiclefortaxpurposes.ThenewunderstandingisnotquotedintheyearlyguidelinespublishedbytheTaxDirectorate(Lignings-ABC2006),inUtvalget(regulartaxnewsmagazine),orontheweb-pageoftheMinistry.Thenewunderstandingis now used by the tax office that handles claims for refund of Norwegian withholding tax(CentralTaxOfficeforForeignTaxAffairs,“COFTA”).

If aSICAV is investing inNorwegian securities, anydividends fromNorway to theSICAVwouldbesubjectto25%withholdingtax,unlesstheindividualunitholderintheSICAVcandemonstratethatheisa:

companyresidentintheEU–hewillgetafullrefundofwithholdingtaxindividualresidentintheEU–hewillgetarefundlimitedtothetaxtreatywithholdingtaxratecompanyorindividualpersonresidentintaxtreatycountryoutsidetheEU–refundlimitedtotaxtreatywithholdingtaxrate.

Inpractice,weassumethatthecompanypayingthedividendwouldlevya25%withholdingtax,andthattheunitholdermustapplyforrefund.

••

•

Pakistan (1) Taxisleviableatarateof�5%fortaxyear2007.Thedifferencebetweenthetaxleviableandthetaxwithheldof�0%shouldbepaidwhenareturnisfiled.

(2) Unquotedsecuritiesaresubjecttocapitalgainstaxatarateof�5%fortaxyear2007.25%ofthegainrealiseduponthesaleofunquotedsecuritiesheldformorethan12monthsisexempt.

152

Withholding Tax Rates

Applicable to Luxembourg UCIs Appendix I

Country of investment

Type of income

Interest Capital gains on sale of

securities %�Dividends %�Corporate bonds

%�Government

bonds %�

Panama 10/20(1) 5(2) 0(2) �0/10(2)

Paraguay 19.25(1) 15or�0 0 �0(2)

Peru 4.1(1) 0(2) 0 0(�)

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Panama (1) Awithholdingtaxrateof20%appliesinthecaseofdividendspaidonbearershares.

(2) Capitalgainsderivedfromthetransferofbonds,shares,quotasandothersecuritiesissuedbylegalentitiesaresubjecttoincometaxatarateof10%.

Capitalgainsderivedfromthetransferofshares(orotherformsofparticipation)ofaPanamaniancompanyshouldbeconsideredlocalsourceincomeregardlessofwherethetransactiontakesplace, ifsuchcompanyhasoperationswithin the territoryof theRepublicofPanamaorhasassetslocatedinPanama.

BuyersarerequiredtowithholdanddepositwiththeTaxAuthorities5%ofthepurchasepricepaidtotheseller.Thisamountmustberemittedtothetaxauthoritieswithintendaysfromthedatethewithholdingobligationsarise.

Sellershavethealternativeofconsideringthe5%withholdingtaxtobedefiniteandfinaltaxorcomputingtheactualnetgainandpayingtaxatarateof10%onthegain.The5%withheldwillbecreditedagainstthefinal10%capitalgaintaxliabilitydetermined.ProfitsfromthesaleofsecuritiesissuedbycorporationswhichhavetaxableincomeinPanama,orcapitalassetslocatedinPanama,aretaxableasordinaryincome.ProfitfromthesaleofsecuritiesissuedbycompaniesregisteredwiththeNationalSecuritiesCommissionandtradedonPanamanianStockExchangearetaxexempt;inthesecasestheinterestisalsoexempt.

Profitsfromthesalefromgovernmentsecuritiesarealsotaxexempt;theinterestisexempt.

Paraguay (1) Thedividendwithholdingtaxrateis5%(5%x100)=5.Ifdividendsareremittedabroadanadditionalwithholdingtaxof15%applies(15%x95)=14.25.Therefore,thefinalwithholdingtaxrateis19.25%fordividendsremittedabroad.

(2) Fornon-residents,a�0%withholdingtaxonthecapitalgainrealisedisapplied.

Peru (1) Dividendsdistributedtonondomiciledentitiesorindividualsasfrom1January200�aresubjecttoa4.1%withholdingtax.

(2) Interestobtainedonbonds issuedbyaPeruviancorporationbymeansof apublicoffer andpursuanttorequirementsestablishedinthePeruvianMarketSecuritiesLawareexemptfromIncomeTaxuntil�1December2008.Asageneralruleinterestobtainedbynon-residentsaresubjecttoa�0%withholdingIncomeTax.However,areducedrateof4.99%maybeappliedifthefollowingrequirementsaremet:(i) If the loans are provided in cash, the foreign currency entrance to Peru shall be fully

documented.(ii) TheloansaresubjecttoanannualinterestratenotgreaterthanthePRIMErateplus6points

orLIBORrateplus7points,dependingonwhetherthecreditcomesfromtheAmericanoranyothermarket,respectively.Thisrateincludesallfees,commissionsandpremiums.

(iii) Thelenderandtheborrowerarenotregardedaseconomicallyrelatedparties.

(�) Capital gains, arising from the transfer of securities are exempt from Income Tax until �1December2008providedthefollowing:(i) If the transferee is acorporation,exemptionapplies to securities listed in theSecurities

PublicRegistertransferredthroughtheLimastockexchange(ii) If the transferee is a natural person or natural married persons with common property,

exemptionappliestosecurities,listedornotintheSecuritiesPublicRegister,andtransferredthroughthestockexchangeorOTC.Consequently,OTCtransfersmadebycorporationsaresubjecttoIncomeTax.

AsperarecentamendmenttotheIncomeTaxLaw,toenterintoforceon1January2009,theaboveruleshavebeensubject tosignificantchanges.The followingexemptionshavebeeneliminated: i) interestfrombondsissuedbyPeruviancorporationsbymeansofapublicofferandpursuanttorequirementsestablishedinthePeruvianMarketSecuritiesLaw,ii)capitalgainsobtainedbycorporationsinthestockexchangeandiii)capitalgainsobtainedbyindividuals,howeverinthiscaseareducedIncomeTaxrateof5%hasbeenenacted.

154

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Applicable to Luxembourg UCIs Appendix I

Country of investment

Type of income

Interest Capital gains on sale of

securities %�Dividends %�Corporate bonds

%�Government

bonds %�

Philippines �5(1) 20(2) 20(�) 0or5-10(4)

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Philippines (1) DividendspaidbyaPhilippinecorporationtoaforeigncorporationnotdoingbusinessinthePhilippinesaregenerallysubjecttoawithholdingtaxof�5%onthegrossamountofdividends.ThetaxmustbewithheldbythePhilippinecorporationandremittedtothetaxauthority.Thetaxratemaybereducedto15%ifthecountryofdomicileoftheforeigncorporationdoesnotimpose tax on offshore dividends or allows a credit for tax deemed paid in the Philippinesequivalent to20% (15%effective1 January2009),which represents thedifferencebetweenthe�5%regulartax(�0%effective1January2009)andthe15%preferentialtaxrate(pursuanttotheamendmentstotheTaxCodeof1997introducedbyRepublicActNo.9��7whichtookeffecton1November2005).

(2) Investmentsbynon-residentforeigncorporationsincorporatebondsmaybeclassifiedasforeignloansunderSection28(B)(5)(a)ofthe1997TaxCode.AnyinterestincomederivedthereinshallbesubjecttoafinalWithholdingTaxof20%.

Section �2(B)(7)(g) of the 1997 Tax Code provides that “Gains realized from the sale orexchangeorretirementofbonds,debenturesorothercertificateofindebtednesswithamaturityofmorethanfiveyears”shallbeexcludedfromthegrossincome.Thus,thegainsderivedfromtheinvestmentsmaybeexemptfromincometax.

Inthisregard,thecourtsandthetaxauthorityhaveruledthattheterm“gain”doesnotinclude“interest”.Hence,interestonlong-termbondsarenotexemptunderSection�2(B)(7)(g)ofthe1997TaxCode.

(�) Interestordiscountsongovernmentsecuritiesaresubjectto20%finalwithholding(income)tax;suchtaxiswithheldbythegovernmentagencyconcernedatthetimeoforiginalissueoftheTreasuryBillsoruponperiodiccouponpaymentsofTreasuryBonds.Gainsrealizedfromthesaleorexchangeorretirementofbonds,debenturesorothercertificateofindebtednesswithamaturityofmore than5yearsshallbeexemptfromincometax(pleaserefer thecaveat infootnote(2)withrespecttothisexemptionprovision).

(4) Sharesofdomesticcorporationsthatarelistedandtradedonalocalstockexchangeareexemptfromincometaxbutsubjecttothestocktransactiontaxof0.5%ofgrosssellingprice(tobewithheldbythestockbroker).Netcapitalgainsrealizedduringthetaxableyearfromthesale,barter,exchangeorotherdisposalofsharesofstockinadomesticcorporationnotthroughthelocalstockexchangeshallbesubjecttothecapitalgainsof5%onthefirstP100,000and10%inexcessofP100,000.

The sale, transfer or exchange of shares in domestic corporations is generally subject todocumentarystamptax(DST)attherateofP0.75oneachP200.00oftheparvalueofthesharessold,transferredorexchanged.However,underSection199oftheTaxCode,asamendedbyRepublicActNo.924�,thesale,barterorexchangeofsharesofstocklistedandtradedthroughthelocalstockexchangeshallbeexemptfromDSTforaperiodoffiveyearsfromtheeffectivityoftheRA924�(i.e.20March2004).

156

Withholding Tax Rates

Applicable to Luxembourg UCIs Appendix I

Country of investment

Type of income

Interest Capital gains on sale of

securities %�Dividends %�Corporate bonds

%�Government

bonds %�

Poland 15(1)(2) 10(1)(�) 10(1)(�) 0(1)(4)

Portugal 15(1) 0(2) 0(�) 0(4)

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Poland (1) LuxembourgSICAVsandSICAFsqualify for theapplicationof theDoubleTaxationTreaty(DTT)concludedbetweenPolandandLuxembourg if theyare liable to tax inLuxembourg.Additionally,inordertobenefitfromtheDTTprotectiontheyshouldpresenttheirLuxembourgtax residency certificate to the Polish income payer. There are certain doubts whether theinvestment funds inquestionmaybeclassifiedas“liable to tax”and thereforewhether theyqualifyforthetreatyprotection(ifthiswouldbethecasethestandardPolishwithholdingratesondividend,interest,andcapitalgainswouldapply).However,basedonourexperienceandbasedontheopinionoftaxauthorities,oncethePolishcompanyobtainedacertificateoftaxresidency,theDTTratemaybeapplied.

(2) Thenon-treatywithholdingtaxrateondividendsis19%.Thelowertaxtreatyrate(5%)appliesifthedividendispaidtoacompanyotherthanpartnership(aLuxembourgtaxresident)whichownsatleast25%ofthedividendpayingcompany.

(�) Thetreatyrateoninterestis10%,comparedwiththenon-treatyrateof20%.Interestoncertaingovernmentbonds(floatedontheforeignmarkets)isexemptfromwithholdingtax.

(4) Asarule,capitalgainsreceivedbycorporations/companiesaretaxedwith19%Polishcorporateincome tax. If Luxembourg SICAVs and SICAFs are considered Luxembourg tax residents,capitalgainsearnedbythemshouldbeexemptfromtaxationinPolandbasedontheArticle1�of theDTT.This relatesalso tocapitalgains fromthesaleofshares inPolishrealestatecompanies.IfSICAVsandSICAFsarenotprotectedbythetaxtreaty,thereisariskthatthecapitalgainsrealizedbythemuponsaleofPolishsecuritiesmaybeconsideredasderivedinPolandandthereforesubjecttotaxationtherein(withregular19%corporateincometax).TheissueofwhenthegainsareconsideredasderivedinPolandisnotclearlyregulatedinPolishtaxlawandthereforerequiresacase-by-caseanalysis.

Portugal (1) If Luxembourg investment funds qualify for the application of the Double Taxation TreatyconcludedwithPortugal, therateondividendsshoulddecreasefrom20%(domestic rate) to15%(treatyrate).

(2) Interest on Portuguese corporate bonds registered in a clearing system recognised by thePortugueseSecuritiesandExchangeCommission(exceptbondsofamonetarynature,namelyshort-term debt with maturity less than one year) and paid to non-residents (except non-residentsdomiciledinoffshorejurisdictionsorresidentsholdingmorethan20%)areexemptfromwithholdingtaxinPortugal.Otherwisetheratesare20%(domesticrate)or10%or15%(treatyrates).Thetreatyrateapplicableoncorporatebondsis10%ifthepayingentityconsidersinterestascorporateincometaxdeductibleandpaysittoafinancialestablishmentresidentintheothercountryand15%ontheremainingsituations.

(�) Interest on Government bonds registered in a clearing system recognised by the PortugueseSecurities and Exchange Commission (except bonds of monetary nature, namely short-termdebtwithmaturitylessthanoneyear,butincludingTreasuryBills)andpaidtonon-residents(exceptnon-residentsdomiciledinoffshorejurisdictionsorresidentsholdingmorethan20%)are exempt from withholding tax in Portugal. Otherwise the withholding tax rates are 20%(domesticrate)or10%or15%(treatyrates).

(4) CapitalgainsonPortuguesecorporatebondsandGovernmentbondsbenefitingfromtheinteresttaxexemptiondescribedin(2)and(�)aboveareexemptfromtaxationinPortugal.

Inothercases,capitalgainsarisingfromthesaleofsharesandbondsareexemptfromtaxduetothedoubletaxationagreement.IftheDoubleTaxationTreatydoesnotapply,capitalgainsareexemptfromtaxationinPortugal,withthefollowingexceptions:thenon-residentholdsmorethan25%oftheresidententities;thenon-residentcompanyobtainingthegainisresidentinsomespecificcountries,namelyoffshorejurisdictions;thesaleofaparticipationintheequitycapitalofaresidentcompanywhoseassetsarecomposedofmorethan50%inrealestatepropertieslocatedinPortugalorthesaleofaparticipationintheequitycapitalofacompanythathasadomainrelationshipoveraresidentcompanywhoseassetsarecomposedofmorethan50%inrealestatepropertieslocatedinPortugal.

158

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Applicable to Luxembourg UCIs Appendix I

Country of investment

Type of income

Interest Capital gains on sale of

securities %�Dividends %�Corporate bonds

%�Government

bonds %�

Puerto Rico 10 0 0 0(1)

Qatar 0 0 0 0

Romania 16(1) 16(2) 0 0(�)

Russian Federation 15 9/15/20(1) 0/9/15(1) 0/20/24(2)

Rwanda 15 15 15 15

Saipan and Micronesia �0(1) �0(1) �0(1) 0

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Puerto Rico (1) Awithholdingtaxrateof0%appliesprovidedthetransactioniseffectedoutsidePuertoRico.Otherwisetherateis29%.

Romania (1) Luxembourg SICAVs and SICAFs may qualify for the benefits of the Double Tax TreatyconcludedbetweenRomaniaandLuxembourgifthesefundscanprovidetheRomanianpayerwith certificates of fiscal residency from the Luxembourg FiscalAuthorities. The domesticRomanianwithholdingtaxrateis16%bothondividendsandoninterestreceivedbynon-residentshareholders(interestearnedfromcurrentaccounts/onsightdepositsinRomanianbanksareincertainconditionsnotsubjecttowithholdingtax).

TheDoubleTaxTreatyratesare15%ondividends(reducedto5%forholdingsofatleast25%)and10%oninterest.TheinterestwithholdingtaxisreducedtoniliftheLuxembourgentitiesqualifyasfinancialinstitutions(certifiedassuchbyagovernmentalbodyfromLuxembourg).

BasedontheprovisionsoftheRomanianlegislation,non-residentsmaybenefitfromthe10%dividendtaxrateprovidedbytheRomaniandomesticlegislationincaseofRomanianresidents.Therefore,dividendsreceivedfromRomaniabyLuxembourginvestmentfundsmaybesubjectto10%Romaniandividendtax(i.e.morebeneficialthanthetaxrateprovidedbythedoubletaxtreaty),ifavalidcertificateoffiscalresidenceisavailable.

(2) ThewithholdingtaxexemptionappliestointerestfromdebtinstrumentsissuedbyaRomanianlegalperson(e.g.corporatebonds),providedthatsuchinstrumentsaretradedonarecognisedstockexchangeandtheinterestisnotpaidtoanaffiliateoftheissuer.

(�) BasedonthedomesticRomanianlawapplicablein2006,capitalgainsobtainedbyaforeignentityfromdisposalofsharesheldinaRomanianlegalentityaresubjecttodomesticcorporateincometaxatarateof16%.However,underthedoubletaxtreaty,suchcapitalgainsfromthedisposalofsharesshouldbetaxableonlyinLuxembourg(pleasenotethatthedomesticRomanianlaw’sdefinitionof“immovableproperty”wouldnotincludeshares).Whereacertificateoffiscalresidency from theLuxembourg tax authorities canbeprovidedbyLuxembourg investmentfunds,themorefavorabletreatmentprovidedbythedoubletaxtreatyshouldapply.

Russian Federation

(1) The following tax rates apply to the tax base which is determined for operations involvingparticulartypesofdebtobligations:a) 15%- for interestonStateandmunicipalsecurities (other than thesecuritieswhichare

referredtounderb)&c)below)andforinterestonmortgage-backedbondsissuedafter1January2007

b) 9%- for interestonmunicipalsecurities issuedforaperiodofnot less than threeyearsbefore1January2007andforinterestonmortgage-backedbondsissuedbefore1January2007

c) 0%-forinterestonStateandmunicipalbondswhichwereissuedupto20January1997inclusively,andforinterestonthe1999StatebondswhichwereissueduponthenovationofseriesIIIOGVZbonds.

(2) Incomefromthesaleofsharesin(shareinterestsinthecapitalof)Russianorganizationsmorethan50%ofwhoseassetsconsistofimmovablepropertysituatedintheterritoryoftheRussianFederation,andfromthesaleoffinancialinstrumentsderivedfromsuchshares(shareinterests)issubjecttowithholdingtax.However,incomefromthesaleonforeignexchangesofsecuritiesor financial instrumentsderived therefrom,which are legally circulatedon those exchanges,shallnotbedeemedtobeincomefromsourcesintheRussianFederationandthereforeshouldnot be taxable.Where tax applies, the withholding tax rate is 24% on the gain (i.e. incomefromthesalelesscosts).Intheabsenceofinformationonthecostsofthesecuritiessoldthewithholdingtaxrateis20%ongrossrevenue.

Saipan and Micronesia

(1) Normallythewithholdingtaxissubjecttoarebateofapproximately50%.

160

Withholding Tax Rates

Applicable to Luxembourg UCIs Appendix I

Country of investment

Type of income

Interest Capital gains on sale of

securities %�Dividends %�Corporate bonds

%�Government

bonds %�

Saudi Arabia 5(1)(2) 5(1)(2) 5(1)(2) 20(1)(�)

Senegal 10 1�(1) 0 25

Seychelles 15 0 0 0(1)

Singapore 0(1) 15(2)(�) 15(2)(4) 0(5)

Slovak Republic 0(1) 19(2) 19/0(2)(�) 0/19(4)

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Saudi Arabia (1) In practice, it may not be permissible for a Luxembourg fund to invest in a SaudiArabianpubliclyheldentity.However,underthenewCapitalMarketLawbeingimplementedcurrently,thisisexpectedtochange.

(2) Inaccordancewiththetaxregulationssince�0July2004,5%withholdingtaxispayableonpaymentsofinterestanddividendspaidbyresidententitiestonon-residents.

(�) CapitalgainsarisingfromsaleofsecuritiesnottradedinontheSaudistockexchangearesubjecttoawithholdingtaxatarateof20%.

Senegal (1) Awithholdingtaxrateof6%appliestointerestonlongtermbonds(morethan5years).

Seychelles (1) Thereisnowithholdingtaxoncapitalgains,thisisnotmentionedanywhereinthelegislation.

Singapore (1) Singaporehas,witheffectfrom1January200�,movedtoaone-tiersystemanddividendspaidunderthissystemattractnodividendwithholdingtax.However,therearetransitionalprovisionsinplaceandfrankeddividendsunderthepreviousimputationsystemcanstillbedeclaredandpaidup to�1December2007.Wheredividendsarepaidunder these transitionalprovisionsandarefrankedbytheunderlying20%corporateincometax,the20%corporateincometaxisconsideredtobe“attached”tothedividend.The20%withholdingtaxsatisfiestheSingaporetaxliabilityofanon-residentshareholder.ItwasproposedintherecentSingaporebudgetthatthecorporatetaxratebereducedto18%witheffectfromtheyearofassessment2008(i.e.forincomeearnedinfinancialyear2007).Thefrankingofdividendswillalsobe18%.

(2) ThereducedDoubleTaxationTreatyrateof10%oninterestmaybeapplicableiftheSICAV/SICAFisabletosubmitaform,certifiedbytheLuxembourgtaxauthorities,statingthatitisthebeneficialowneroftheinterestandthateffectivemanagementisinLuxembourg.

FCPsmaynotbeabletorelyonthetreaty.

(�) Anexemptionappliestocertainqualifyingcorporatedebtsecuritiesissuedupto�1December2008.

(4) Awithholdingtaxrateof0%appliestocertaingovernmentbonds.

(5) Capitalgainsarenottaxable,butwhetherthegainarisingfromsaleofsecuritiesisacapitalgainwillgenerallydependonwhethertheselleriscarryingonabusinessoftradinginsecurities.

Slovak Republic

(1) Distributionofdividends(i.e.profitaftercorporatetaxation)relatedtoprofitfrom2004onwardsisnotsubjectanytaxationinSlovakia.

(2) Thewithholdingtaxrateshownisthenormalrateof19%andnottheDoubleTaxationTreaty(whichwassignedbetweenLuxembourgandCzechoslovakia)rateof0%,asitisconsideredthatthetreatyrateisinfactnotappliedinSlovakia.

(�) Incomefrommortgagebondsissuedbefore�1December200�andincomefromStateBondsandbondsofNationalBankofSlovakiadenominated inhardcurrencyandissuedbefore�1December200�isexemptfromtheSlovakincometax.IncomefromStateBondsissuedabroadafter�1December200�isalsoexemptfromSlovaktaxation.

(4) Theamountof19%representsa taxguaranteewhichappliesonly incaseof saleofSlovaksecuritiestoSlovaktaxresidentsorpermanentestablishmentsinSlovakia.Thetaxguaranteeof19%mightbeeitherconsideredasfinaltaxorsubmittingataxreturncouldbeconsidered.From1January2006thetaxguaranteehasbeencancelledforentitiesfromtheEU,butonlythosewhicharesubjecttotaxation(fromworldwideincome)inanEUMemberState.

162

Withholding Tax Rates

Applicable to Luxembourg UCIs Appendix I

Country of investment

Type of income

Interest Capital gains on sale of

securities %�Dividends %�Corporate bonds

%�Government

bonds %�

Slovenia 15/5(1) 15/5(2) 15/5(2) 0/0(�)

South Africa 0 0 0 0(1)

Spain 18(1) 0(1) 0(1) 0(1)

Sri Lanka 10 10 10 0(1)

Swaziland 15 10 10 0

Sweden �0 0 0 0

Switzerland �5 �5/0(1) �5 0

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Slovenia (1) According to theDoubleTaxationTreatyconcludedbetweenSloveniaandLuxembourg, thewithholdingtaxrateof5%appliesiftheholderowns25%ofcapital.Inallothercases,a15%withholdingtaxrateapplies(accordingtotheCorporateIncomeTax(CIT)Act).WeassumetheconditionsinrespecttotheEUParent-SubsidiaryDirectivearenotmet.

(2) In linewith theDoubleTaxationTreaty, thewithholding tax rateof5%mayapply; inothercases,the15%withholdingtaxrateappliesaccordingtotheCITAct.

(�) AccordingtotheCITAct,capitalgainsderivedbyanon-residentfromthesaleofsecuritiesarenottaxed,exceptincaseofapermanentestablishmentinSlovenia(inthatcase2�%corporateincometaxappliestocapitalgains).AccordingtotheDoubleTaxationTreaty,thereisnotaxatsourceforcapitalgains.

South Africa (1) Taxoncapitalgainswillapplytoimmovableproperty,sharesrepresentingdirectlyorindirectlymorethan20%oftheequityinanyentityinwhichatleast80%ofthemarketvalueisattributableeitherdirectlyorindirectlytoimmovablepropertysituatedinSouthAfricaandtoanyassetofa permanent establishment of the non-resident through which a trade is carried on in SouthAfrica.

Spain (1) The withholding tax rate is 18% on dividends and 0% on interest and capital gains if therecipientisresidentinanEUcountrythatisnotonSpain’staxhavenlist,andsuchinterestisnotattributabletoitsSpanishpermanentestablishment.

SinceMay2000, theSpanishtaxauthoritieshaveheld,bymeansofseveral taxrulings, thatLuxembourg UCITS (i.e. which have complied with the UCITS Directive) are not to beconsideredasresidentsofataxhaven,andthereforeitcanreasonablybemaintainedthattheymight also enjoy treaty protection rates (10% on dividends), provided that the investmentinstitutionsareabletoobtainataxcertificateissuedbytheLuxembourgtaxauthoritiesstatingthattheyaretaxresidentinLuxembourgunderthetermsoftheTreaty.(ThecertificatemuststatethetaxresidenceoftheinvestmentinstitutioninLuxembourgforthepurposesoftheSpain-LuxembourgTreaty).

Conversely, for Luxembourg investment institutions that do not comply with the UCITSDirectiveand/orcannotobtainacertificateofresidenceinthetermsoftheTreaty,thefollowingwithholdingtaxeswouldbelevied:

18%ondividends0%oninterestandcapitalgainsiftheinstitutioncanprovideanyevidenceofitstaxresidenceinLuxembourgforpurposesotherthanthetreatyones.

In other cases, 18% on interest, 0% on capital gains arising from the disposal of sharesofSpanishlistedcompaniesorSpanishCollectiveInvestmentSchemesand18%onothercapitalgains.

••

Sri Lanka (1) Thesaleofunlistedsecuritieswheretheperiodofownershipislessthan2yearsissubjecttoataxof15%ontheprofitonsale.Listedsecuritiesandunlistedsecuritiesheldformorethan2yearsarenotliabletothistax.Theturnoverofeverysharetradingtransactioninrespectoflistedsharesisliabletoa“sharetransactionlevy”of0.2%.Thesaleoflistedsharesonwhichthesharetransactionlevyispaidisnotliableto15%incometaxirrespectiveoftheperiodforwhichtheyhavebeenheld.

Switzerland (1) There isnoSwisswithholding tax leviedon interestpayments in connectionwith corporateloans.

164

Withholding Tax Rates

Applicable to Luxembourg UCIs Appendix I

Country of investment

Type of income

Interest Capital gains on sale of

securities %�Dividends %�Corporate bonds

%�Government

bonds %�

Syria 8.25/Nil(1) 8.25 8.25 (2)

Taiwan 25(1) 20 20 0

Tanzania 5(1) 10 10 �0(2)

Thailand 10(1) 15(1) 0(2) 0(�)

Trinidad and Tobago 15(1)(2) 20(1) 20(1) 0

Tunisia 0 10 10 0

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Syria (1) Sharedividendsarealsosubjecttoa8.25%withholdingtax.

(2) Thelawissilentaboutthetaxabilityofcapitalgainsonthesaleofsecuritiesbynon-residententities.

Taiwan (1) Awithholdingtaxrateof20%appliesifinvestmentsareapprovedbytheTaiwangovernment.

Tanzania (1) A5%withholdingtaxrateappliestocompanieslistedontheDaresSalaamStockExchange.Otherwise,therateis10%.

(2) Corporationsarenotsubjecttocapitalgainstaxonincomefromthesaleofinvestments.Suchgainsaresubjecttocorporatetaxatarateof�0%onnetincome.

Thailand (1) While it is not yet certain whether the treaty rates will be applied to Luxembourg SICAVs/SICAFs, the treaty and non-treaty rates on dividends and interest are both 10% and 15%respectively.

(2) AccordingtoThaitaxlaw,a0%withholdingtaxrateappliestointerestpaidtocompanies.Inprinciple,therefore,FCPsmaybesubjectto15%unlesstheunitholdersthemselves(companiesorpartnerships)areabletoclaimthe0%rate.

(�) There is no Thai tax on the capital gains from the disposal of securities between non-Thairesidents.Intheorythereisnocapitalgainstaxbutthegainissubjecttocorporateincometax.Thewithholdingtaxof15%may,however,bepayableifthebuyerisaThairesidentandthesellerisanon-Thairesidentwhodoesnotbenefitfromtreatyprotection.Todeterminewhetherthesellerhastreatyprotection,theThaiauthoritieslookattheregisteredownerratherthanthebeneficialowner.Nocapitalgainstaxiswithheldwherethetransactioniscarriedoutthroughandinthenameofanon-Thaibrokerin,forexample,SingaporeorUK,inaccordancewiththeDoubleTaxationTreatybetweenthesecountriesandThailand.

Trinidad and Tobago

(1) The withholding tax rates shown are the non-treaty rates as there appears to be uncertaintyregardingtheapplicationoftheDoubleTaxationTreatyconcludedwithTrinidadandTobago.

(2) The10%withholdingtaxrateappliestodividendspaidtocorporationsowning50%ormoreofthevotingrightsofthedistributioncompany.The15%rateappliestootherdividends.

166

Withholding Tax Rates

Applicable to Luxembourg UCIs Appendix I

Country of investment

Type of income

Interest Capital gains on sale of

securities %�Dividends %�Corporate bonds

%�Government

bonds %�

Turkey * 0(1) 0(2) 0(�) 0(4)

Uganda 15 15 15 0

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Turkey * Underaregulationeffectivefrom1January2006,incomederivedfromsecuritiesandtheotherstock market instruments within the scope of the regulation was subject to withholding tax(applicable rate is10%) regardlessofwhether thebeneficiariesare residentornon-residentindividualsandlegalentities,ortaxpayerorthoseexemptfromtax,orwhetherthegainsderivedaretax-exempt.However,asof7July2006,thewithholdingtaxrateapplicabletosuchincomeis 0% for non-residents.Pleasenote that the regulation in questiondoes not cover dividendincome.

(1) The withholding tax rate is 0% if the fund has a Permanent Representative (PR) inTurkey.Otherwise the applicable withholding tax rate, which was previously 10%, is 15% for thedividendsdistributedonorafter2�July2006.However,thereisanimportantpointtomentionincaseofdividenddistribution.Ifthedividenddistributionismadetoagrandfatheredportfolio,withholdingrateis0%.Ontheotherhand,ifthedistributionismadetoasecondportfolio(newportfolioindualsystem),thewithholdingrateis10%until2�July2006,after2�July2006itis15%.

(2) Thewithholdingtaxrateisapplicabletobondsissuedafter1January2006(pleasenotethatthisrateappliestointerestincomederivedonorafter7July2006.Intheeventthattheinterestincomewasderivedintheperiodbetween1January2006and6July2006,theapplicableratewouldbe15%).Iftheissuedateisbefore1January2006,theapplicableratewillbe10%.

(�) GovernmentbondsdonotincludeEurobonds.BothcapitalgainsandinterestincomederivedfromEurobondsarenotsubjecttowithholding.Itwillnotbedeclared.

Interestincomewassubjectto15%forinterestincomederivedfromthoseissuedafter1January2006intheperiodbetween1January2006and6July2006.Onorafter7July2006,therateis applied at 0%. If the issue date is before 1 January 2006, the applicable rate will be 0%regardlessofwhentheinterestincomeisderived.

(4) Thewithholdingtaxrateis0%ifthegainsderivefrombondsissuedandsharespurchasedafter1January2006(Pleasenotethatthisrateappliestocapitalgainsderivedonorafter7July2006).

Eitherwithholding taxof0%or10%is theapplicable rate forgainsderivedfrombondsissuedbefore1January2006andsharespurchasedbefore1January2006ifthefundhasaPR.Otherwise,therateis�2%(rateapplicablefrom1January2006:20%corporateincometax+15%withholdingonremaining80ofdividenddistributed(12)=totaltaxburdenof�2%.) The PR is responsible for submitting the corporate tax return within the 15 daysfollowingthedatethefullincomepaymentisobtained.IncaseofnoPR,thepartyprovidingsuchincome(i.e.Turkishbankorfinancialinstitution,etc.)isresponsibleforsubmittingthereturnandpayingthetaxes.

•

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168

Withholding Tax Rates

Applicable to Luxembourg UCIs Appendix I

Country of investment

Type of income

Interest Capital gains on sale of

securities %�Dividends %�Corporate bonds

%�Government

bonds %�

Ukraine 15 15/25(1) 0/15/25(2) 15/25(�)

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Ukraine (1) Incomeoncorporatebonds:a) interest-onlybearingbonds:15%withholdingtaxrateappliestotheamountofinterestb) bonds with discount income only: 25% withholding tax rate applies to the amount of

discountc) bondscombiningbothinterestanddiscountincome:15%withholdingtaxrateappliesto

theamountofinterestonsuchbonds Thereisaconflictbetweendifferentprovisionsofthelegislationinrespectoftaxationof

thediscount,inparticular:15%withholdingtaxrateappliesto,interalia,theamountofdiscountincomepayabletonon-residents,although25%withholdingtaxrateappliestothedifferencebetweenthefacevalueofthebondpayable tonon-residentsby the issuerand thepriceof thebond’sacquisitionat theprimaryorsecondarystockmarket.Itisconsideredthatthereismorelikelihoodofsubstantiatingtheapplicabilityof15%rate.

Non-residentsmayacquireorsellbothcorporateandgovernmentdiscountbondsonlythroughapermanentestablishmentinUkraineoraUkrainianresidentactingasanagentofsuchnon-resident.Intheory,thisrequirementmaybeappliedtothetransactionsonacquisitionandsaleofinterest-bearingbondsaswell.

•

•

(2) Incomeongovernmentbonds:a) interest-onlybearingbonds:

0%withholdingtaxrateappliestotheamountofinterestonexternalgovernmentbondssold(placed)tonon-residentsoutoftheterritoryofUkrainebynon-residentauthorizedagents15%withholdingtaxrateappliestotheamountofinterestongovernmentbondsplacedontheconditionsdifferentfromtheabove.

b) bondswithdiscountincomeonly:0% withholding tax rate applies to the amount of discount income on externalgovernmentbondssold(placed)tonon-residentsoutoftheterritoryofUkrainebynon-residentauthorizedagents.25%withholding tax rate applies to the amountof discount incomeongovernmentbondsplacedontheconditionsdifferentfromtheabove.

Thelegislationdoesnotdescribethetaxationpatternapplicabletointerest/discountwithregardtothecaseswheretheinterest/discountispayablebytheissueronthebondspurchasedatthesecondarymarket.

c) bondscombiningbothinterestanddiscountincome:0%withholdingtaxrateappliestotheamountofdiscountorinterestincomeonexternalgovernmentbondssold(placed)tonon-residentsoutoftheterritoryofUkrainebynon-residentauthorizedagents.As regards the bonds placed on conditions different from above there is a conflictbetweendifferentprovisionsofthelegislation,inparticular:

15%withholdingtaxrateappliestotheamountofthediscountincomepayabletonon-residents,although25%withholdingtaxrateappliestothedifferencebetweenthefacevalueofthebondpayabletonon-residentbytheissuerandthepriceoftheiracquisitionbynon-residentsontheprimaryorsecondarystockmarket.

It isbelievedthat thereismorelikelihoodofsubstantiatingtheapplicabilityof the15%withholdingtaxrate.

•

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•

•

•

•

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170

Withholding Tax Rates

Applicable to Luxembourg UCIs Appendix I

Country of investment

Type of income

Interest Capital gains on sale of

securities %�Dividends %�Corporate bonds

%�Government

bonds %�

Ukraine 15 15/25(1) 0/15/25(2) 15/25(�)

United Arab Emirates 0 0 0 0

United Kingdom 0 20(1)(2) 0(�) 0

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Ukraine (continued)

(�) Capitalgains:a) Capitalgainsongovernmentbonds (of anyof the typesasmentionedabove) including

externalgovernmentbondssold(placed)tonon-residentsoutoftheterritoryofUkrainebynon-residentauthorizedagents:

15%withholdingtaxrateappliestointerest-bearingbonds.Itisconsideredthatthereisahighlikelihoodofsubstantiatingtheapplicationofthe15% rate to capital gains on interest-free (discount) bonds, although the authoritiesmighttrytoapplythe25%rateattributingthecapitalgaintopermanentestablishmentthroughwhichsaleofthebondsistobeperformed.

b) Capitalgainsoncorporatebonds:15%withholdingtaxrateappliestointerest-bearingbonds.Itisconsideredthatthereisahighlikelihoodofsubstantiatingtheapplicationofthe15% rate to capital gains on interest-free (discount) bonds, although the authoritiesmighttrytoapplythe25%rateattributingthecapitalgaintopermanentestablishmentthroughwhichsaleofthebondsistobeperformed.

c) Capitalgainsonshares:15%withholdingtaxrateapplies.

•

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•

United Kingdom

(1) InterestpaidonquotedEurobondsisexempt.

(2) Thedistinctionbetweenyearlyorshort interest isrelevant inthecontextofwithholdingtax.Wheretheinterestpayableis“shortinterest”thereisnorequirementtodeducttaxatsource.“Shortinterest”isthatpaidonaloan/bondwithatermlessthan�65days.Thereisarequirementtodeductincometaxatsourceforyearlyorannualinterest.Yearlyinterestisthatpaidonaloan/bondwithatermcapableoflasting�65daysormore.

(�) Interestongiltsispaidwithoutdeductionofincometaxunlesstheregisteredholderelectsforpaymentwithdeductionoftaxattherateof20%.

172

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Applicable to Luxembourg UCIs Appendix I

Country of investment

Type of income

Interest Capital gains on sale of

securities %�Dividends %�Corporate bonds

%�Government

bonds %�

United States of America

�0(1) �0(2) �0(2) 0

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United States of America

(1) Itshouldbenotedthataverysmallnumberofsecurities thatarepublicly tradedin theU.S.equities market are, in fact, partnerships for U.S. tax purposes. The tax compliance for aninvestmentinaU.S.partnershipismuchmorecomplex,andincertaincasesmayrequiretheinvestortofileaU.S.taxdeclaration.

Thetaxconsequencesfordividendspaidbycertain“realestateinvestmenttrusts”(REITs)andcertainotherU.S.realestateinvestmententities,andcertaingainsonsalewithrespecttosuchentitiesandotherentitiesthatprimarilyinvestinU.S.realestate,canbemorecomplex,andmayrequiretheinvestortofileaU.S.taxdeclaration.InvestorsshouldobtainadvicebeforeinvestinginequitysecuritiesofentitiesthatprimarilyinvestinU.S.realestate,althoughitshouldbenotedthat,thereissignificantreliefforinvestorsholdinglessthan5%ofthesharesofcertainpublicly-tradedREITsandotherentities.

(2) BroadexceptionsseverelylimitthegeneralapplicabilityofU.S.withholdingtaxatthe�0%rateoninterestincome.Theseexceptionstowithholdingoninterestincomeare:

a) 0%rateappliestointerestoncorporateandU.S.governmentobligationsiftheobligationsarepayablewithin18�daysfromthedateofissuance.Therefore,short-termU.S.treasurybills,commercialpaper,andbanker’sacceptanceswilltypicallyproduceincomenotsubjecttoU.S.withholdingtax.

b) 0%rateappliestointerestonbankdeposits(includingcertificatesofdeposit).

c) Under the“portfoliodebtexemption”, interestonobligations(including,butnot limitedto, U.S. treasury obligations and other government bonds) issued after 18 July 1984 isgenerallynotsubjecttoU.S.withholdingtaxiftheobligationsareeither(a)inregisteredform (e.g. held through the Depository Trust Company or other such central securitiesdepositories),andthebeneficialowneroftheinterestdulycertifiesitsforeignstatusandtheforeignstatusofanypartnersofthebeneficialowneror(b)notinregisteredformprovidedcertainrestrictionsexistintendedtoprohibitsaletoandownershipbyU.S.persons(thatis,theobligationmustbetargetedtonon-U.S.markets,underwhataregenerallyknownas the “TEFRA D” rules). For securities held at onshore accounts in the United States(witheitherU.S.ornon-U.S.institutions),certificationofforeignstatuswouldbedoneonFormW-8BENfornon-U.S.corporationsandindividuals,andFormW-8IMYfornon-U.S.partnerships.ForsecuritiesheldataccountsoutsideoftheUnitedStateswithinstitutions(eitherU.S.ornon-U.S.)thathaveagreedwiththeU.S.taxauthoritiestobecome“qualifiedintermediaries”(“QIs”),foreignstatusmight,inthealternative,beestablishedwith“know-your-customer”documentation,astheQImayhaveagreedwiththeIRS.

d) Since1January2001,non-U.S.partnershipsaretreatedona“look-through”basis.Anon-U.S. partnership (ordinarily, except for a special election, FCPs, SICAVs, and SICAFsprobablywouldnotberegardedaspartnershipsforU.S.taxpurposes;ontheotherhand,asociétéennomcollectiforasociétéencommanditemightwellbeapartnershipforU.S.taxpurposes)mustobtainIRScertificatesofforeignstatusfromallofitspartnersandattachthemtoitsownIRScertification,andexplainhowitsincomeistobeallocatedamongthepartners,unlessthepartnershiphasobtainedwithholdingforeignpartnership(WFP)statusfromtheIRS,inwhichcaselessdocumentationisprovidedtothepayeroftheincome(i.e.thecustodian).

e) Ifthenon-U.S.partnershipobtainsWFPstatusfromtheIRS,thenthepartnershipwillbeartheburdenofobtainingandkeepingstatementsfrompartnersregardingtheirstatus,insteadofbeing required to file these statementswith thepayerof the income.Theproceduresfor becoming aWHP are set forth in IRS Revenue Procedure 200�-64, as modified byIRS Revenue Procedure 2004-21. In theory, this may be an attractive option for non-U.S.partnerships in somecircumstances.However, thishasnotprovenverypopular inpractice.

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Applicable to Luxembourg UCIs Appendix I

Country of investment

Type of income

Interest Capital gains on sale of

securities %�Dividends %�Corporate bonds

%�Government

bonds %�

United States of America

�0(1) �0(2) �0(2) 0

U.S. Virgin Islands 11 11 11 0

Uruguay 0 0 0 0

Uzbekistan 10(1)(2) 10(1) 10(1) 0(1)

Venezuela �4/50/60(1) 0(2) 0 (�)

Vietnam 0 0.1(1) 0.1(1) 0.1(2)

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United States of America (continued)

f) Anon-U.S.partnershipisobligatedtoidentifyitsnon-U.S.partnerstotheU.S.payerofinterestorotherinvestmentincome,whointurnisobligatedtoidentifythenon-U.S.partnerstotheIRSonForm1042-S,ForeignPerson’sU.S.SourceIncomeSubjecttoWithholding,exceptincertaincaseswhenthepartnershiphasWFPstatus.

g) 0% rate applies for interest on obligations of various U.S. states and their politicalsubdivisions and the District of Columbia (e.g. interest from municipal bonds). Certainlimitedexceptionsapplytothisgeneralrule.

It should be noted that distributions out of income by a U.S. mutual fund of the usual typegenerally are treated as dividends for this purpose, and so subject to �0% withholding, eventhoughsomeoralloftheincomeofthefundmightbeinterestincomethatcouldbereceiveddirectly without Withholding Tax. Persons making money market investments in the UnitedStatesareencouragedtomakethoroughenquiryaboutthisissue,especiallysinceterminologyisnotalwaysprecise.Itmaynotalwaysbeimmediatelyclearwhetheranoffered“moneymarket”investmentis(a)abankdeposit,whichisexemptfromwithholdingunderthebankdepositrulementionedabove,or(b)aU.S.mutualfundoftheusualtype.ItispossibleforaU.S.mutualfundoftheusualtypethatreceivesincomethatwouldbeexemptfromwithholdingifearneddirectlytopayan“interest-relateddividend”outofsuchincomethatalsowouldbeexemptfromwithholding.AsofMarch2007,certainfundstakeadvantageoftheserulesbutmanydonot;investorsareencouragedtoenquirewhetheraparticularmutualfundproposestotakeadvantageoftheserules.

Uzbekistan (1) Inordertoobtaintreatybenefits,certaindocumentsshouldbefiledwiththeUzbekistanTaxAuthorities including a certificate of residence issued by the Luxembourg Tax Authoritiesconfirming that the recipient of income is resident in Luxembourg for treaty purposes. Therateofwithholdingtaxondividendsandinteresthasbeendecreasedfrom15%to10%asof1January2006accordingtoUzbekistannationallegislation.

(2) 5%withholdingtaxappliesiftheownerholdsatleast25%ofthecapitalandisacompany.

Venezuela (1) Dividends are subject to income tax withholding from 1 January 2001. The rates vary inconsideration to the activity of the entity paying the dividend. For ordinary companies theratewillbe�4%,for theminingrelatedenterprises itwillbe60%andfor thehydrocarbonsexplorationandexploitationcompaniesitwillbe50%.Thetaxablebasewillbeconstitutedbythedifferencebetweenthefinancialprofitandthetaxableincomeofthepayerentityinthesametaxperiod.

(2) Interest is subject to a withholding tax rate that could vary from 4.95% to �2.�%.The rateapplicableis4.95%ifthebeneficiarycanbedeemedafinancialinstitutioninLuxembourgand�2.�%forallothercases.

(�) Salesproceedsaresubjectto1%withholdingtaxforsecuritiesdealtinontheStockExchangeand5%forthosethatarenot.

Vietnam (1) Bond interest is subject to withholding tax at a rate of 0.1% on the total value of the bondincludingfacevalueandinterest(basedonCircular72/2006/TT-BTCdated10August2006andtheDoubleTaxationTreatybetweenLuxembourgandVietnam,Article11).

(2) Disposal of securities (including shares, investment fund certificates, bonds, but except fortax-exemptbonds)issubjecttowithholdingtaxatthedeemedrateof0.1%onthetotalsalesproceeds(basedonCircular72/2006/TT-BTCdated10August2006andtheDoubleTaxationTreatybetweenLuxembourgandVietnam,Article1�).Transferofcapitalinacompanywillbesubjecttocapitalgainstaxat28%onthenetgain.

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Withholding Tax Rates

Applicable to Luxembourg UCIs Appendix I

Country of investment

Type of income

Interest Capital gains on sale of

securities %�Dividends %�Corporate bonds

%�Government

bonds %�

Yemen 0(1) 0(1) 0(1) 0(1)

Zambia 15 15 15 0

Zimbabwe 15(1) 10 0(2) 20(�)

Seefootnotes()opposite.

177

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IsAp

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Footnotes

Yemen (1) WithholdingtaxwasabolishedinYemen.Anewtaxcalledthe“AdvancePaymentTax”wasintroducedandwhichis10%ofthevalueoftheinvoicepayabletonon-residentcompanies.

Zimbabwe (1) Thewithholdingtaxrateis15%forcompanieslistedonstockexchange.Otherwise,therateis20%.

(2) Governmentbondsareexemptfromtaxonnon-residents’interestprovidedastatutoryinstrumentconfirmingtheexemptionispublishedintheGovernmentGazette.

(�) At the time thesharesaresold,capitalgainswithholding taxat therateof5%ofgrosssaleproceedsinrespectofsharesquotedontheZimStockExchangeand10%ofgrosssaleproceedsinrespectofothershareshastobewithheldandremittedtoZimbabweRevenueAuthoritybythedepository/stockbroker.

SalesfromaZimbabwesourcebydealersaresubjecttoincometaxattherateof�0.9%payableonquarterlypaymentdatesofprovisionaltaxduringeachyearofassessment.

SalesfromaZimbabwesourcebylongterminvestorsaresubjecttocapitalgainstaxattherateof20%.Withholdingtaxwillberefundableinthecaseofsalesbydealersandoffsetagainstthecapitalgainstaxpayableonassessmentinthecaseoflongterminvestors.

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Glos

sary

Appe

ndix

II

APPENDIX II Glossary

TheglossaryprovidesalistofabbreviationsandFrenchtranslationsofEnglishtermsusedinthisguide.

English Name French Name Abbreviation

AssociationoftheLuxembourgFundIndustry AssociationLuxembourgeoisedesFondsd’Investissement

ALFI

auditor réviseurd’entreprises

CCLux CentraledeCommunicationsLuxembourgS.A. CCLux

CentralServiceforStatisticsandEconomicStudies

ServiceCentraldelaStatistiqueetdesEtudesEconomiques

STATEC

CommissionfortheSupervisionoftheFinancialSector

CommissiondeSurveillanceduSecteurFinancier CSSF

CommitteeofEuropeanSecuritiesRegulators CESR

commonfund FondsCommundePlacement FCP

Cooperativecompany Sociétécooperative

Cooperativecompanyorganizedasapubliclimitedcompany

Sociétécoopérativeorganiséesousformedesociétéanonyme

EfficientPortfolioManagement EPM

EuropeanFundandAssetManagementAssociation

EFAMA

EuropeanCompany SE

EuropeanEconomicArea EEA

EuropeanUnion EU

InternationalFederationofAccountants IFAC

InternationalStandardsonAuditing ISA

investmentcompanyinriskcapital Sociétéd’investissementencapitalàrisque SICAR

investmentcompanywithfixedcapital Sociétéd’investissementàcapitalfixe SICAF

investmentcompanywithvariablecapital Sociétéd’investissementàcapitalvariable SICAV

Lawof19July1991onUCIsthesecuritiesofwhicharenotintendedtobeplacedwiththepublic

The1991Law

Lawof20December2002onUCIs The2002Law

180

Appendix IIGlossary

English Name French Name Abbreviation

Lawof�0March1988onUCIs The1988Law

Lawof5April199�ontheFinancialSector,asamended

The199�Law

LuxembourgBankers’Association AssociationdesBanquesetBanquiers,Luxembourg

ABBL

LuxembourgInstituteofAuditors InstitutdesRéviseursd’Entreprises IRE

LuxembourgStockExchange BoursedeLuxembourg LSE

MoneyMarketInstruments MMI

netassetvalue NAV

OfficialGazette Mémorial

over-the-counter OTC

Partnershiplimitedbyshares Sociétéencommanditeparactions

pensionfundpoolingvehicles PFPV

Privatelimitedcompany Sociétéàresponsabilitélimitée S.àr.l.

privateportfoliomanager gérantdefortunes

publiclimitedcompany Sociétéanonyme S.A.

subscriptiontax taxed’abonnement

totalexpenseratio TER

TradeRegister RegistredeCommerceetdesSociétésLuxembourg

RCSL

UndertakingsforCollectiveInvestment UCI

UndertakingsforCollectiveInvestmentinTransferableSecurities

UCITS

ValueAddedTax VAT

Value-at-Risk VAR

181

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APPENDIX III Ernst & Young Luxembourg Asset Management Related Publications

Surveys and Leaflets

TheLuxembourg2007LawonSpecializedInvestmentFunds

UCITSIII

RiskValuationServices–Measuring,MonitoringandManagingRiskinUCITSIIIFunds

UCITSIII-SophisticatedFundRiskManagement

UCITSIIIRiskManagement-CSSF07/�08Guide

ServingtheHedgeFundUniverse

GlobalHedgeFundServices

LuxembourgHedgeFundServices

LuxembourgRealEstateFunds–aComprehensiveSurveybyErnst&Young

TheSICAR:Luxembourg'stailormadestructureforthePrivateEquityFundIndustry

EYeonLuxembourgTax

InvestmentFunds–LuxembourgVATChanges

AbolitionoftheLuxembourg1929HoldingCompaniesRegime

SPF:Luxembourglaunchesnew‘PersonalInvestmentCompany’

LuxembourgTaxAlert

LuxembourgInvestmentFundsandVATImpactof theECJDecisions in theBBLandAbbeyNationalcasesasfromApril1st,2007

ChangeinVATratesapplicableasfromJanuary1st,2007

TheLuxembourgIFRSDesk–Vision&Quality

WorldwideCorporateTaxGuide2007

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Appendix IIIErnst &

Young Luxembourg Asset

Managem

ent Related Publications

Webcast

TheMarketsinFinancialInstrumentsDirective(MiFID):KeyMilestonesontheCriticalPathforAssetManagers

Newsletters

TheLuxembourgFinancialConnectionforExecutivesinFinancialServices

ThisnewsletterdiscussesregulatoryandmarketplacedevelopmentsinthefinancialservicesindustryfromaLuxembourgperspective.Itincludesarticleswrittenbyourexperts,Luxembourg,EUandinternationalnews,andanupdateonourconferenceactivitiesandpublications.

GlobalEYeonIFRS

Thisbi-monthlypublicationprovidesaneasy-to-readcombinationofErnst&Young’sviewsonanumberofcurrentissuesregardingIAS/IFRSingeneral,andeducationaltechnicalcontentbothforIFRSexpertsandthenoviceuser.

IFRSAlert

AsupplementtoGlobalEyeonIFRS

DevelopmentsinFinancialInstruments

ThisnewslettersummarisesthemaindiscussionsandconclusionsreachedconcerningfinancialinstrumentsatmeetingsoftheInternationalAccountingStandardsBoard(IASB)andIFRIC.ItalsoreportsonotherdevelopmentsinthereportingoffinancialinstrumentsunderInternationalFinancialReporting StandardsReporting StandardsStandards(IFRS).

BoardMattersQuarterly–CriticalInsightsforToday’sAuditCommittee

Articles

Ernst&YounginLuxembourgregularlypublishesarticlesrelatedtoinvestmentfundtopics.Thefollowingareexamples:

PrivateEquityFundAdministration:Apeople–ortechnology–drivenbusiness?

UCITSIII:Towardsintegratedandreliableriskmanagement?

ThechallengesofimplementingaLuxembourgrealestatefund:afastgrowingnichemarket.

VisionoftheEuropeanFundIndustryfromaUSPerspective.

CESRfinalguidelinestosimplifythenotificationproceduresforUCITS:anyrealprogressonfacilitatingcross-borderfunddistribution?

Contact

Theabove-mentionedpublicationsandmanyothersareavailableontheErnst&Youngwebsiteorbycontactingourmarketingdepartment:+�52421247547.

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This publication contains information in summary form and is therefore intended for general guidance only. It is not intended to be a substitute for detailed research or the exercise of professional judgment. Neither Ernst & Young S.A. nor any other member of the global Ernst & Young organization can accept any responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication. On any specific matter, reference should be made to the appropriate advisor.

ernSt & Young

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Contacts

Asset Management

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