Luxembourg - Alfi

Tokyo, 8th November 2010

Tokyo, 8th November 2010
Welcome
H.E. Paul Steinmetz
Ambassador of Luxembourg to Japan

Tokyo, 8th November 2010
Introduction
Camille Thommes
Director General of ALFI

Tokyo, 8th November 2010
Welcome
Kazutoshi Inano
Chairman
Investment Trust Association Japan (JITA)

Tokyo, 8th November 2010
Luxembourg,
your bridge to Europe and the world
John Li
KPMG

November 8 th 2010
Listening Luxembourg: to to investors
Gateway to
Europe & the World

Luxembourg – Gateway to Europe & the World
Area:
2,586 km²
Population: 502,100
GNP:
37.7bn€(2009)
Administrative languages:
• Proven central gateway to EU market with
more than 500 million consumers..
• Some 40% of the EU’s GDP is concentrated
within a 500km radius of Luxembourg.
Extended to 700km, this figure even reaches
70%.
•Outward orientation of business: >80% of
total production of goods and services are
exported.

Luxembourg - Influence in the European Union
• Founding Member of the European Union (1951)
• Founding Member of the Schengen area
• Joined NATO in 1949
• Joined OECD in 1960
• The Prime Minister, Mr Jean-Claude Juncker, is chairman of the Euro-Group
and the European Financial Stability Facility (EFSF) created in May 2010 is
headquartered in Luxembourg
• Luxembourg is 3 rd European Union capital (along with Brussels and Strasbourg)
• A number of major European institutions have their headquarters in Luxembourg
European Court of Justice
European Court of Auditors
European Investment Bank

Luxembourg - key economic data
Luxembourg
European Union
GDP (per inhabitant 2009) 271 100
GDP growth 2009 -3,7% -4,2%
GDP growth (forecast 2010) 2,0% 1,0%
Unemployment rate (Aug’10) 5,00% 9,6%
Inflation 2,4% 1,0%
Government debt % of GDP 14,5% 78,7%
Budget deficit (2009) -0,7% -6.8%
Current account surplus (deficit) 5.60% -1.1%
Source: Eurostat

Luxembourg economy : more than a financial centre
INDUSTRY
MEDIA & E-COMMERCE
LOGISTICS

Luxembourg financial centre – at the heart of Europe

Luxembourg financial centre –
Facts and Figures
148
Banks
Stock
Exchange
45,660
quotations
Luxembourg
Financial
Centre
3,636
Investment
funds
(12, 718 subfunds)
261
Reinsurance
companies
93
Insurance
companies
288
Investment
firms and
intermediaries
Source: CSSF / CAA / LSE

Over 20 years of Luxembourg fund sector growth
14000
12000
Number of
funds / units
18.36% net assets growth
rate over last 12 months
€ millions
2,500.000
10000
2,000.000
8000
1,500.000
6000
1,000.000
4000
2000
500.000
0
Funds Units Assets under Management
Source: ALFI/CSSF

UCITS - Inflows of capital
EUR billions
Source: EFAMA

Luxembourg is Europe’s largest fund centre
2000000
1800000
30.7% of UCITS market
1600000
1400000
1200000
1000000
Net Assets Euros
800000
600000
400000
200000
0
Source: EFAMA figures as at 30 June 2010

Luxembourg: Number 1 for global fund distribution:
market share of cross-border funds for public distribution
Sweden 80%
UK 75%
France 73%
Germany 73%
Switzerland 71%
Bahrain 77%
Korea 91%
Japan 76%
Taiwan 73%
Hong Kong 77%
Singapore 74%
Peru 93%
Chile 78%
Source: Luxembourg for Finance

Largest Fund promoters in Luxembourg
80% of the top 30 Assets Managers use Luxembourg as their primary European platform for
distribution
Sumitomo Trust & Banking

Luxembourg - Platform for Success in Business
•Strategic geographical position at the heart of EU
•Stable political and socio-economic environment
•Modern legislative and regulatory framework
• A skilled multicultural and multilingual labour force
• Business friendly state – LUXEMBOURG INC
THANK YOU

Tokyo, 8th November 2010
Recent trends on the tightening regulation
in Japan
Akihiro Wani
Linklaters LLP Tokyo

2010 年 11 月 8 日
日 本 マーケットの 投 資 環 境
と 金 融 規 制 の 強 化
Listening to investors
Japanese Investment
Environment and Tightening
Financial Regulations
~ What’s happened in Japan

契 約 型 公 募 投 資 信 託 の 設 定 解 約 状 況 / 株 式 投 信 ( 年 計 )
出 所 : 社 団 法 人 投 資 信 託 協 会

契 約 型 公 募 投 資 信 託 の 設 定 解 約 状 況 / 公 社 債 投 信 ( 年 計
)
出 所 : 社 団 法 人 投 資 信 託 協 会

リーマン・ショックを 受 けての 投 資 信 託 の 印 象
>「 元 本 割 れリスクのあ
る 商 品 だと 改 めて 感 じ
た」(43.1%)
>「 世 界 的 に 影 響 が 及 ん
でいるので 一 時 的 に 運
用 成 績 が 悪 くても 仕 方
がない」(37.6%)
出 所 : 社 団 法 人 投 資 信 託 協 会 投 資 信 託 に 関 する
アンケート 調 査 報 告 書 -2009 年 ( 平 成 21 年 )

世 界 金 融 危 機 と
Listening to to investors
金 融 法 制 の 見 直 し

世 界 金 融 危 機 と 金 融 法 制 の 見 直 し
• サブプライム・ローンの 証 券 化 商 品 の 価 格 形 成 の 誤 りの 原 因 として、
格 付 会 社 による 格 付 の 失 敗 及 び 証 券 化 商 品 の 原 資 産 の 情 報 開 示 不 足 が
指 摘
格 付 会 社 規 制
証 券 化 商 品 の 開 示 規 制
ただし、 日 本 では、サブプライム 以 前
から、
これらの 点 についての 改 善 の 必 要 性 が
指 摘 されていた

世 界 金 融 危 機 と 金 融 法 制 の 見 直 し
• 2008 年 秋 のリーマン・ブラザーズ 破 綻 後 のシステミックリスクへの 波
及 の 原 因 として、クレジット・デフォルト・スワップ 取 引 市 場 参 加 者
による 信 用 リスク、カウンターパーティリスクの 不 十 分 な 管 理 、 市 場
全 体 の 取 引 状 況 の 不 透 明 性 が 指 摘
• 2009 年 9 月 のG20ピッツバーグサミット 首 脳 声 明
デリバティブ 規 制 の 見 直
し

格 付 会 社 規 制
金 融 商 品 取 引 法 平 成 21 年 度 改 正 により、 格 付 会 社 規 制 が 導 入
• 登 録 規 制
信 用 格 付 業 を 行 う 法 人 は、 内 閣 総 理 大 臣 の「 登 録 を 受 けることができ
る」
• 格 付 会 社 の 義 務
誠 実 義 務 、 体 制 整 備 義 務 、 監 督 委 員 会 の 設 置
• 禁 止 行 為
密 接 な 関 連 を 有 する 発 行 者 等 の 格 付 の 禁 止 、コンサルティング 行 為 の
同 時 提 供 の 禁 止 、 格 付 担 当 アナリストの 金 品 受 領 の 禁 止
• 情 報 開 示 義 務
格 付 方 針 等 の 公 表 、 説 明 書 類 の 公 衆 縦 覧
• 監 督
業 務 改 善 命 令 、 登 録 取 消 ・ 業 務 停 止 命 令 、 報 告 徴 収 ・ 立 入 検 査 権

証 券 化 商 品 の 開 示 規 制
金 融 庁 : 金 融 商 品 取 引 業 者 の 監 督 指 針 上 の 留 意 事 項 (IV-3-1-2)として、
業 者 の 情 報 収 集 及 び 伝 達 の 体 制 整 備 を 求 める
日 本 証 券 業 協 会 : これに 対 応 するために、 自 主 規 制 「 証 券 化 商 品 の 販 売
等 に 関 する 規 則 」により 協 会 員 の 体 制 整 備 義 務 を 具 体 化
• 原 資 産 等 の 内 容 ・リスクに 関 する 情 報 の 収 集 及 び 伝 達 ( 販 売 規 則 第 4
条 • ) 販 売 に 先 立 つ、 証 券 化 商 品 に 係 る 原 資 産 等 の 内 容 やリスクに 関 する
情 報 の 収 集 義 務
• 販 売 時 における、 顧 客 に 伝 達 するべきと 判 断 した 情 報 の 伝 達 義 務
• 販 売 後 における、 顧 客 からの 要 望 があった 場 合 の 情 報 の 収 集 ・ 伝 達
• 標 準 義 情 務 報 レポーティング・パッケージ( 販 売 規 則 第 6 条 )により、 伝 達
が 必 要 とされる 情 報 の 質 ・ 内 容 の 基 準 を 策 定

デリバティブ 規 制 の 見 直 し
金 融 商 品 取 引 法 平 成 22 年 度 改 正 により、 以 下 の 内 容 の 店 頭 デリバティブ 取
引 規 制 が 導 入
• 店 頭 デリバティブ 取 引 等 に 関 する 清 算 機 関 (セントラルカウンター
パーティ:CCP)の 利 用 の 義 務 付 け
• 清 算 機 関 に 関 する 基 盤 強 化 を 図 った 上 で、 一 定 の 店 頭 デリバティブ
取 引 等 に 対 する、 清 算 機 関 の 利 用 義 務 付 け
• 取 引 情 報 保 存 ・ 報 告 制 度 の 整 備
• 金 融 商 品 取 引 業 者 等 や 清 算 機 関 に 対 し、 取 引 情 報 の 保 存 、 監 督 当 局
への 取 引 情 報 の 提 出 を 義 務 付 ける 制 度 を 整 備
• 金 融 商 品 取 引 業 者 等 は、 自 らに 代 わり、 取 引 情 報 の 収 集 ・ 保 存 を 行
う 機 関 ( 取 引 情 報 蓄 積 機 関 )による 保 存 、 監 督 当 局 への 取 引 情 報 の
提 出 を 選 択 できる 制 度 を 整 備

世 界 金 融 危 機 と 日 本 におけるファンド 規 制 の 連 関
投 信 目 論 見 書 制 度 の 改 正
• サブプライム・ローンの 証 券 化 商 品 の 価 格 形 成 の 誤 りの 原 因 として、
証 券 化 商 品 の 原 資 産 の 情 報 開 示 不 足 が 指 摘
• しかし、 今 回 の 投 信 目 論 見 書 制 度 の 改 正 は、その 流 れを 必 ずしも 汲 む
ものではない。 「 投 資 者 にとって、 分 かりやすく 利 用 しやすい 投 資 目
論 見 書 へ」がスローガンであり、 読 みやすくするための 量 の 削 減 をい
とわない • 投 資 者 にとって 重 要 な 投 資 情 報 を 読 みやすく 利 用 しやすい 形 で 提 供
• 交 付 目 論 見 書 : 投 資 家 にとって 特 に 重 要 な 投 資 情 報 であると 考
えられる 情 報 のみ、 読 みやすく、 利 用 しやすい 形 で 提 供 するこ
とを 目 的
• 請 求 目 論 見 書 : 記 載 内 容 を 有 価 証 券 届 出 書 と 同 じとし、 幅 広 い
情 報 を 提 供 することを 目 的

世 界 金 融 危 機 と 日 本 マーケット
金 融 危 機 に 対 するリアクション
• 国 内 : 「 貯 蓄 から 投 資 へ」の 金 融 構 造 改 革 、 金 融 危 機 に 対 する 非 当
事
者 意 識
• 世 界 : 金 融 危 機 の 影 響 を 色 濃 く 残 すマーケ
ットと 投 資 家 の 投 資 意 識
今 後 の 課 題 :
相 反 するマーケットにおける 金 融 規 制 、マー
ケット
プレーヤー 及 び 投 資 家 の 意 識 等 の 調 整 と 連 携

Question

Tokyo, 8th November 2010
UCITS:
Opportunities for global distribution
in a regulated environment
UCITS III & IV – latest developments
Moderator: Freddy Braush, Linklaters LLP, Luxembourg
Mark Evans, PwC
Gast Juncker, Elvinger Hoss & Prussen
Sanjiv Sawhney, Citibank

November, 8 th 2010
Investor Mind Set Post
Financial Crisis
35

Legacy of a Crisis
• Reaction to the Financial Crisis will result in more onerous regulatory
environment, but also a more sophisticated and demanding Investor
base.
Features of the Crisis
Collapsing Asset Values
Corporate Solvency Issues
Systemic Risk
Madoff Scandal
Redemption Restrictions
Lack of Investor Transparency
Reaction – Asset Management Centres of Influence
Investors
Regulators
Governments
• More demanding of Asset Manager performance/governance
• Increasing sophistication to mitigate risks/recover losses
• Driving industry transparency re end-Investors, e.g.; UCITS IV
• Pushing liability of future crisis to industry, e.g.; AIFMD
• Enhanced capital requirements on financial firms, e.g.; Basel III
• Limitation in high-risk activities, e.g.; Dodd-Frank
36

A New Wave of Sophistication
• Both Institutional and Retail / HNWI Investor segments becoming more
sophisticated, though dynamics vary between segments.
The Sophistication Trend in Institutional and Retail / HNWI Investor Segments
Institutional
• More rigorous evaluation criteria prior to investment:
– Lengthier, more structured reviews of processes/controls
– Require greater transparency, less discretionary style drift
• Improved oversight of investments:
– Better internal risk-management processes/governance
– Improved use of risk metrics and Investment Committees
• Increased use of Investment Consultants:
– 2009 BCG survey of European Institutional Asset Mgrs
– 33% expect consultants role to increase in developed markets,
e.g.; UK, Germany, France
– 50% expect greater consultant involvement in Middle East and
Asia
Retail / HNWI
• Expectation for Distributors to provide better service:
– Need for more professional and transparent service
– Seek clarity regarding products, fees, and risk
• Returning appetite for new and alternative offerings:
– Sales of retail structured products growing in 2010
– Focus on more informed buying of these products
• Distributors in turn expect better service from Asset Managers:
– Demand client-tailored, transparent, competitive offerings
– In some cases are reducing the number of managers used
– Expect enhanced support model to their retail networks from
their asset management suppliers
Combined Implications
• Investor activity aligning with regulatory/governmental focus.
• Emphasis on end-to-end transparency in product content and investment process
• Also an expectation for improved service and value-added tools/capabilities
37

Investment Orientation
• Across Institutional, HNWI, and Retail investor segments, there is riskdriven
retrenchment, supported an opportunistic approach to achieving
alpha.
• Ongoing concerns re lack of transparency and complexity of investment products.
• Core and Explore – simplicity, safety and quality are the core; improving alternatives are the explore
Institutional
• Looking at investments into alternatives, as markets emerge from the crisis
• Supported by a more rigorous approach to vetting and understanding investments.
• More pragmatic approach than retail investors, with allocation to active/passive long-only as core
• Pre-crisis HNWI had large positions in hedge funds
HNWI
• Allocations to alternatives lower than pre-crisis levels, with a more opportunistic orientation
• Focused on exit-enabling requirements; liquidity and robust redemption processes
• The “new” HNWI from Asia/Middle-East is more suspicious of western generated alternative strategies
• Were most vulnerable investor class during the financial crisis
• Tended to buy the “latest trend” product; bank-dominated distribution offered limited support
Retail
• Post-crisis focussing on capital protection and tax efficiency as core investment strategy
• Supported by opportunistic forays into alpha products such as absolute return funds.
• Accumulation, rather than speculation, is now the key focus; as well as product transparency
38

November, 8th 2010
Luxembourg - The
Domicile of Choice
39

Why Luxembourg
• Integrity – Stability – Experience – Innovation – Service Quality
• Political & economic stability
• Outward looking, innovative & collaborative approach between government, regulator &
fund industry
• Large multi-lingual workforce
• Wide range of products & strong innovation
• Comprehensive and adaptable regulation
• World class fund infrastructure & support
• Experienced fund set-up and structuring capabilities
• 20+ years experience in global fund distribution
• World-wide acceptance of the “made in Luxembourg” brand
40

Asia – An Opportunity for Luxembourg UCITS
• Asia Represents the largest emerging market oportunity for UCITS sales.
Latin America
• Brazil
• Chile
• Argentina
• Mexico
• Peru
$815
$10
UCITS
Total
$6.95 Tr
~$35
~$15
Middle East
• Saudi Arabia
• Kuwait
• Bahrain
• UAE
• Qatar
Forces Driving Growth in Emerging Markets
• Elevated economic growth and wealth creation rates
• Younger populations, a leading indicator of pension system inflows
• Penetration of asset management products in emerging markets will
rise in step with the creation of new investable assets
$ 1,694
$684
Asia Pacific
• Singapore
• Hong Kong
• South Korea
• Taiwan
Total Mutual Fund AUM 2009
(USD Billions)
Total Mutual Fund AUM invested
offshore 2009 (USD Billions)
Sources: EFAMA (June 2010), Cerulli (2010)
Korea
Hong
Kong Singapore Taiwan
AUM of Mutual
Funds/Unit Trust 305 628 626 62
(US$bn)
AUM/GDP 32.1% 298% 317% 18%
Foreign Manager’s
Share in
On-shore Market
Availability of
Off-shore Funds
“The emerging markets are something of a “promised land” for asset managers … who need to find new methods of distribution
in these markets.”
Philippe Morel, co-author of ‘In Search of Stable Growth: Global Asset Management 2010’
41

Global Trends in Asset Management
From unregulated to regulated
From less regulated to more regulated
• Fund migrations
• Fund re-domiciliations
42

Re-domiciliation
Drivers for re-domiciliation
• G20 discussions
• Prohibition on investors investing in the so-called “offshore tax haven funds”
• Increasing pressure by home country regulators
43

Re-domicilation
Re-domiciliation of funds (incl. UCITS) from end 2007 to end 2009
Countries of origin
Target countries
Over 30% of re-domiciliations of funds between
2007-2009 were to Luxembourg
Source : Lipper
44

Luxembourg Regulated Investment Funds
Regulation
- eligible asset classes only
- public distribution – EU Passport
- high level of regulation
- risk capital only (including PERE)
- qualiyfing investors only
- medium level regulation
- all asset classes
- public distribution – no EU passport
- medium level regulation
UCITS
UCI
Part II
SIF
SICAR
- all asset classes
- qualifying investors only
- medium level regulation
Structuring -
flexibility
45

From UCITS to UCITS IV
UCITS
20 December 1985
UCITS III
21 January 2002
UCITS IV
13 July 2009
Permit cross-border offering of
open-ended investment funds to
EU investors
• Harmonization of investor
protection rules
• Marketing through simple
notification process - passport
Driving Forces
More asset classes eligible (bank
deposits, units of other UCIs, MM
and use of derivatives)
Benefits
• Widening of investment power
and product offering in UCITS
• Enhanced Risk Management
Procedures
Permit industry consolidation,
improve efficiency and increase
investor protection
Principal amendments to UCITS
regime:
• Simplified notification
procedures
• KII
• EU-wide fund merger regime
• Management Company
Passport
• Master-Feeder structures
46

UCITS III latest developments
I. Which strategies in a UCITS
• Long only bond, cash and equity strategies
• Alternative Strategies How
and « Newcits »
• Commodities
• Hedge Funds
• Properties
• Derivatives on financial indices
• Structured financial instruments
• Closed-end funds
• Open-end funds
• 130/30
• Other products: Exchange Traded Funds (“ETFs”), Socially Responsible
Investments (“SRIs”), Sharia compliant funds, etc.
47

UCITS III latest developments
II. What are the protections for investors
• Convergence trends between traditional and hedge fund management are accelerating:
‣ UCITS can accommodate certain hedge fund strategies
‣ AIFM Directive : UCITS may become the « recipient » of hedge fund managers
BUT UCITS is a retail product
• Eligibility : UCITS can accommodate alternative strategies but within certain parameters
• Volatility: VaR limits to be complied with
• Liquidity : UCITS should be able to meet redemption request at any time
• New sophisticated products under UCITS III BUT reputation of the UCITS brand has to
be maintained
‣ Through adequate management of all types of risks
48

REGULATOR
COORDINATION
UCITS IV – in a nutshell
Reduce
Administrative
Burden
Notification
Procedure
Increase
Investor
Protection
Key Investor
Information
Increase
Market
Efficiency
Fund Mergers
ManCo
Passport
Master-Feeder
Date of Implementation : July 1st, 2011
49

UCITS IV: What is it about
• Luxembourg timelines for implementation
• Management Company passport
Objective: consolidation – economies of scale – cost reduction
Optional regime
Principle: management company located in one member state can provide
full management company services to a UCITS located in another member
state (administration/management/distribution)
‣ For you: subject to regulatory clearance in your jurisdiction – no major
changes
‣ For Luxembourg: opportunity to become the centre of choice for location of
Management Companies (also for your products)
50

UCITS IV: What is it about
• Simplified Notification Procedure
Objective: improve time to market – reduction of costs – improve
competitiveness v. other products, national products
Principle:
• Time to market in the EU significantly reduced
• Submission of documents on a regulator to regulator basis
‣ For you: No substantial change
‣ For Luxembourg: overall efficiency gain in view of the submission of
documents
51

UCITS IV: What is it about
• Cross Border Mergers
Objective: facilitate consolidation of European Fund Industry – economies of
scale – reduction of costs
Principle: establish a single merger procedure ( recognising the specificities
of different legal systems
‣ For you: benefit from a more concentrated and cost-effective product; your
regulator needs to get comfortable with the proposed procedures and
timings
‣ For Luxembourg: attract other structures and consolidate in existing
Luxembourg based UCITS flagships:
• Already an existing trend without these regulatory changes
52

UCITS IV: What is it about
• Master – Feeder Structures
Objective: permit pooling of assets by allowing UCITS feeder vehicles –
reduction of costs
Principle: feeder UCITS must invest at least 85% of their net assets into one
master UCITS
‣ For you: a Luxembourg feeder just for you
‣ For Luxembourg: the opportunity to become main master-fund hub
53

UCITS IV: What is it about
• KII
Objective: improve investor protection by making disclosure more
understandable to the retail investor
Principle: provide a short clear and standardised 2 page document to
investors permitting them to compare different funds from different
promoters/jurisdictions
‣ For you: a document for use also in your jurisdiction (Japanese mandatory
prospectus)
‣ For Luxembourg: a useful tool towards improved distribution
54

UCITS cross-border distribution drivers
• Growth of guided architecture
• Local investor demand for international products
• Growth of more sophisticated TA & fund admin businesses
• UCITS III & expanded products
• Elimination of national tax & regulatory barriers
• “Cross-border” increasingly viewed as a core business
• Belief that cross-border generates greater profits & efficiencies
• Asian investor demand for UCITS
• Lack of competition
PwC
November 2010
Slide 55

Growth of cross-border distribution
PwC
November 2010
Slide 56

Domicile share of cross-border funds
Source: Lipper Hindsight and PwC analysis Q3 2010
PwC
November 2010
Slide 57

Domicile share of cross-border distribution
PwC
November 2010
Slide 58

Distribution footprint of cross-border funds
PwC
November 2010
Slide 59

Regional breakdown of cross-border distribution
Region of distribution
Total registrations
at Q3 2010
New registrations past 9
months
Europe 52,694 2,738
Asia Pacific 5,431 123
Americas 2,113 -41
Middle East 816 -78
Africa 227 -6
TOTAL 61,281 2,728
Source: Lipper Hindsight and PwC analysis
PwC
November 2010
Slide 60

Top 100 cross-border fund groups
# of times domicile used as the primary platform
Fund domicile
Used as
1 st
domicile
Used as 2 nd
domicile
Used as 3 rd
domicile
TOTAL
Luxembourg 67 11 2 80
Ireland 21 14 3 38
France 3 7 5 15
UK 4 8 2 14
Germany 1 2 5 8
Belgium - 3 1 4
Source: Lipper Hindsight and PwC analysis, Jan 2010
PwC
November 2010
Slide 61

Hotspots for distribution and key target markets
PwC
November 2010
Slide 62

Top 15 EU countries for distribution (Q3 2010)
Country
Total registrations
% registrations to Luxembourg
funds
Germany 5,817 70%
Austria 4,587 72%
Netherlands 3,944 68%
France 3,838 72%
Spain 3,636 79%
UK 3,618 66%
Italy 3,591 71%
Sweden 2,646 78%
Finland 2,292 82%
Belgium 2,169 84%
Portugal 1,740 90%
Luxembourg 935 -
Ireland 918 85%
Czech Republic 804 77%
Greece 715 92%
GFD
PwC
November 2010
63

Top 15 Non-EU countries for distribution (Q3 2010)
GFD
PwC
Country Total registrations at Q3 2010
% registrations to Luxembourg
funds
Switzerland 4,308 73%
Singapore 2,056 74%
Norway 1,653 79%
Chile 1,399 73%
Hong Kong 1,227 78%
Macau 904 81%
Taiwan 850 76%
Bahrain 758 81%
Jersey 580 85%
Peru 577 61%
Liechtenstein 457 91%
Guernsey 345 67%
Korea 251 100%
South Africa 223 80%
Gibraltar 212 85%
November 2010
64

Asian distribution
Top 100 UCITS Promoters distributing into Asia
Country 1998 2010
Hong Kong 8 50
Singapore 2 75
South Korea 3 15
Taiwan 6 41
Japan 9 17
Source: Lipper Hindsight and PwC analysis
PwC
November 2010
Slide 65

Asian distribution
Number of Foreign Funds Registered in Asia
Country
Domestic
Funds
Foreign Funds
Notified for Sale
Share held by
Foreign Funds
China 428 0 0%
Hong Kong 114 1,655 94%
Singapore 506 2,305 82%
South Korea 2,960 402 14%
Taiwan 504 874 63%
Japan 485 77 17%
Source: Lipper Hindsight and PwC analysis
PwC
November 2010
Slide 66

Asian Fund promoters in Luxembourg
Nomura
SBI Asset Management
Mitsubushi UFJ
Mizuho
Standard Chartered Bank
Diawa
Manulife Funds Direct
Target Funds
Mirae
Arc China Holdings
Harvest
Tokio Marine Asset management
DIAM Group
Sail Advisors
Shinko Securities
Pacific Star
DBS Asset Management
Sumitomo Trust & Banking
Nikko Bank
Softbank Fund Management
JK Capital Management
China Asset management
+ 22 Asian asset managers + 160 funds holding > US$32 billion
PwC
November 2010
Slide 67

Current trends in cross border fund distribution
• Strong growth in X-B funds – 5% to Sept 2010 (1% in 2009)
• Growth in number X-B promoters – esp. hedge fund managers
• Growth in global registrations – 4% to end Sept 2010
• Strong focus on German, Swiss, Italian, Spanish since 1 Jan
• 35% of all new X-B UCITS since 1 Jan 2010 are “sophisticated”
• Strong interest in UCITS from non-European asset managers
• Equity funds are majority of new products launched
• Growing selectivity by third party distributors
• Servicing, costs & performance = key factors of distribution success
PwC
November 2010
Slide 68

November, 8 th 2010
Sophisticated
Infrastructure Required
to Support Globally
Distributed Funds
69

Servicing Challenge – The Cross Border Business Model
• From manufacturing to cross-border distribution
Asset Management Asset
UK
Domicile &
Fund Servicing
Centre
(Central administration)
Asia
Service Fund Services Centres
Centres
Asia Distribution
Channels
Singapore
US
EU
Singapore
Hong Kong
Luxembourg
China
Singapore
Hong Kong
Hong Kong
Taiwan
China
China
Taiwan
Japan
Hong Kong
China
Taiwan
Japan
South
Korea
Investors
& Distributors
South
Korea
Vietnam
70

Luxembourg supporting a global business model
• Asset Managers are increasingly using flagship products for global
distribution, wich requires a sophisticated global servicing infrastructure
CET Timing
Day 1
Subscription/Redemption
Cut-off
Valuation Point
NAV Release
CET Timing
Day 2
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
Europe
Americas
Japan
Asia
Middle East
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
Europe
Americas
Japan
Asia
Middle East
Account Opening
Order Booking
Client Servicing In/Out
Cash Flow Estimation
Order Processing
Batch Processing
In/Out Cash Flow Confirmation
Correspondence Processing
71

Making Fund Global Distribution Support Happen
• Global Cross-Border Fund Servicing Luxembourg – A Global Fund
Services Center
Fund
Services
Hub
6 am
12 pm
EST
CET
Luxembourg
Domicile & Central Administration
Real Time Updates
Real Time Updates
RTU
Real Time Updates
Fund
Services
Hub
Fund
Services
Hub
6 pm
HKT
Fund
Services
Hub
• Global Operating
models, but local
servicing
• Access to local market
expertise within
timezone and local
language
• Superior service taking
into account local
market practices
• Sophisticated
technology
infrastructure to ensure
Asian clients have
access to up-to-date
information
72

Coffee Break

Tokyo, 8th November 2010
Luxembourg -
the global opportunity
for (alternative) asset management

Tokyo, 8th November 2010
Alternative Investment Funds:
How to attract sophisticated investors
Moderator: Gilles Dusemon, Arendt & Medernach
Keith Burman, BBH Luxembourg
Michael Hornsby, Ernst & Young
Raymond Krawczykowski, Deloitte S.A

Luxembourg –
The European Hub For Alternative Investment Funds
“Setting the Scene”
Private Equity
Hedge Funds
Newcits
Real Estate
• Setting the Scene
• AIFM Directive – a basic introduction
• AIFM Directive – the impact on Japanese AIFM / Luxembourg AIF
• Re-Domicilation
• Asset Pooling
• Fund Governance Developments
• Q&A
76

Dec 2003
Dec 2004
Dec 2005
Dec 2006
Dec 2007
Dec 2008
Dec 2009
Jan 2010
Feb 2010
March 2010
Apr 2010
May 2010
June 2010
July 2010
Aug 2010
Sept 2010
The SIF Success Story
Number of SIFs
1400
1200
1000
800
SIF Law 13 Feb 2007
600
1144 SIFs at Sept 2010
400
200
0
Annual
Monthly
Strong growth under the SIF Law since February 2007

Luxembourg – a global AIF centre
MARKETPLACE
LEGAL / TAX
EXPERIENCE
•Central location, with highly
qualified multi-lingual
workforce
•Good connections to other
European financial centres
•Stable government with
strong political support for
the financial services
industry
•Leading investment fund/
financial centre in Europe
and #2 globally
•Responsive, pragmatic and
accessible regulator and tax
administration
•Stable, flexible and
predictable on-shore legal
and tax regime for AIF
through:
• Regulated AIF
•UCI Part II (UCI)
•Specialised Investment
Fund (SIF)
•Risk Capital (SICAR)
• Unregulated SPV / AIF
•Financial holding
company (SOPARFI) for
Luxembourg or foreign
funds
•Strong investor protection
•Over 20 years experience in
structuring AIF
•Strong industry involvement
through ALFI, including
dedicated training in all AIF
assets classes
•Specialisation in custodian
banks and central
administrators
•Tailor-made AIF and SPV
solutions for international
managers / sponsors /
initiators

Regulatory Oversight /
Legal Framework
Funds (UCITS & AIF) Product/Regime Overview
• Transferable securities only
• Public distribution – EU Passport
• High level regulation
UCITS
• All asset classes
• Public distribution – no EU passport
• Medium level regulation
• All asset classes
• Qualifying investors only
• Lower level of regulation
• Diversification requirement
UCI
Part II
SOPARFI
SICAR
SIF
• Mainly used as SPV holding and
financing vehicles
• All asset classes / all investors
• Unregulated
• Risk capital only
• Qualifying investors only
• Lower level of regulation
Structuring -
Flexibility

FUND
STRUCTURE
INVESTMENT
MARKET
SPV
AIF (SIF) Tax Neutrality
INVESTORS
• Minimum tax leakage on capital gains
and income
• End investor usually achieves same
result as direct investment
AIF
(SIF)
• No WHT
• No taxation at fund level
• 1bp levy on NAV
Optional:
SPV
• EU Directives and DTT access
• No or optimally reduced WHT
• Certainty around tax exposure
Investments
• All asset classes/strategies

Tax Neutrality - Luxembourg DDT Network
60 DTTs in force
16 DTTs pending
Updated:
July, 2010
Europe and Central Asia
1. Albania
9. Denmark
17. Iceland
25. Macedonia
33. Romania
41. Switzerland
2. Armenia
10. Estonia
18. Ireland
26. Malta
34. Russia
42. Turkey
3. Austria
11. Finland
19. Italy
27. Monaco
35. San Marino
43. Ukraine
4. Azerbaidjan
12. France
20. Kazakhstan
28.Moldova
36. Serbia
44. Un. Kingdom
5. Belgium
13. Georgia
21. Kyrgiztan
29. Netherlands
37. Slovakia
45. Uzbekistan
6. Bulgaria
14. Germany
22. Latvia
30. Norway
38. Slovenia
7. Cyprus
15. Greece
23. Liechtenstein
31. Poland
39. Spain
8. Czech Republic
16. Hungary
24. Lithuania
32. Portugal
40 . Sweden
America
46. Argentina
48. Brazil
50. Mexico
52. Trinidad &Tobago
47. Barbados
49. Canada
51. Panama
53. United States
Africa and Middle East
54. Bahrain
57. Lebanon
60. Qatar
63. U.A.E.
55. Israel
58. Mauritius
61. Syria
64. South Africa
56. Kuwait
59. Morocco
62. Tunisia
65.China
68. Indonesia
71. Mongolia
74. South Korea
South and East Asia
66. Hong-Kong
69.Japan
72. Pakistan
75. Thailand
67. India
70 Malaysia
73. Singapore
76. Vietnam

8 November 2010
Listening AIF – to to investors
Asset Classes Overview

Luxembourg – the leading European private equity hub
• The leading European regulated private equity centre
• Over 300 regulated private equity funds
• Over US$ 40 billion of PE/VC fund assets administered in Luxembourg
• Growth of 850% over last 5 years
• Leading private equity service providers present in Luxembourg
• Leading global private equity managers operating in Luxembourg
US$ 40 billion in assets
Over 300 regulated funds

Luxembourg – the leading European private equity hub
Global private equity houses using Luxembourg as a center of excellence
• 3i
• American Capital
• Apax Partners
• Bain Capital
• BC Partners
• Carlyle Group
• Cinven
• Coller Capital
• CVC
• Fortress
• Goldman Sachs
• Investcorp
• JP Morgan
• KKR
• Kreditanstalt für Wiederaufbau
(KfW)
• Lazard
• LGT Capital Partners
• Oaktree Capital
• PAI Partners
• Permira
• Unicapital
• TPG
• Warburg Pincus
• [….]

Luxembourg – the leading European real estate hub
• The leading European regulated real estate center
• Over 170 regulated real estate investment funds
• Over US$ 30 billion of real estate investment funds assets
administered in Luxembourg
• Growth of 500% over last 5 years
• Leading real estate service providers present in Luxembourg
• Leading global real estate managers operating in Luxembourg
US$ 30 billion in assets
Over 170 regulated funds

Luxembourg – the leading European real estate hub
Global real estate managers using Luxembourg as a center of excellence
• Aberdeen AM
• AMB
• Amundi AM
• Axa REIM
• Aviva Investors
• BlackRock
• CBRE Investors
• Fidelity
• First State
• Franklin Templeton
• Goodman
• Heitman
• Henderson Global Investors
• Hines
• ING
• JPMorgan AM
• LaSalle IM
• MGPA
• Morgan Stanley
• Pacific Star
• Pramerica
• Prologis
• Schroders
• SEB AM
• Tishman Speyer
• UBS
• [...]

Luxembourg – the leading European “regulated”
hedge funds hub
• The leading European regulated funds of hedge fund and hedge funds
center
• Over US$ 190 billion of hedge fund assets administered in Luxembourg
• Leading hedge fund service providers present in Luxembourg
• Leading global hedge fund managers operating in Luxembourg
US$ 190 billion in assets
Over 2,000 HF
and FoHF funds

Luxembourg – the leading European “regulated”
hedge funds hub
HF & FoHF entities under administration
in Luxembourg
HF & FoHF entities under administration
in Luxembourg
800
700
600
500
400
300
200
100
0
Number of funds
342
349 339 334
289 299
261 305 338 362 336 333
Dec 07 June 08 Dec 08 June 09 Dec 09 June 10
800
700
600
500
400
300
200
100
0
Number of funds
417
451 467 486
423 435
186 203 210 210 202 197
June 08 Dec 08 June 09 June 09 Dec 09 June 10
Domiciled & Administered
Administered
Hedge Funds
Fund of Hedge Funds

Luxembourg – the leading European “regulated”
hedge funds hub
Assets under management in HF & FoHF
administered in Luxembourg ($ millions)
Assets under management in HF & FoHF
administered in Luxembourg ($ millions)
350 000
300 000
250 000
200 000
150 000
100 000
50 000
0
$ millions
Dec 07 June 08 Dec 08 June 09 Dec 09 June 10
78 568
95 117
350 000
300 000
250 000
200 000
150 000
100 000
50 000
0
$ millions
Dec 07 June 08 Dec 08 June 09 Dec 09 June 10
104 882
68 803
Domiciled & Administered
Administered
Hedge Funds
Fund of Hedge Funds

Luxembourg – the leading European “regulated”
hedge funds hub
Global hedge fund managers using Luxembourg as a center of excellence
• Aberdeen Asset Managers
• Alliance Bernstein
• BlackRock
• BlueBay Asset Management
• Crédit Agricole
• Crédit Suisse
• Deutsche Bank
• Fidelity
• GLG
• Goldman Sachs
• HSBC
• ING
• Invesco
• JP Morgan
• LCF Rothschild
• Lyxor
• MAN
• Morgan Stanley
• Permal
• Pioneer Investments
• Transtrend
• UBS
• [...]

Alternative investment strategies in UCITS – why

Overview of the market – UCITS

Alternative investment strategies in UCITS – why
Source: KdK UCITS FoHF Distributors Survey – Q1 2010

Alternative investment strategies in UCITS – why
Source: KdK UCITS FoHF Distributors Survey – Q1 2010

Current Status Report
• Long established financial center
• All “AIF” asset classes and strategies
• Fastest growing AIF/UCITS sector in the world
• Specialization in fund creation, administration and distribution/placement
• A highly qualified multi-lingual workforce
• Recognized efficient prudential supervision
• Prepared and well-positioned for AIFM Directive

8 November 2010
Listening THE AIFMD to to investors

Why did the AIFMD see the light
Credit crisis
Driving forces behind AIFMD
Political pressure to regulate AIF
in order to achieve:
- Systemic Risk monitoring
- Investor Protection
- Functioning of the financial markets
- Single Market
Establish common requirements governing the authorisation and supervision of
AIF managers in order to provide a coherent approach to the related risks and
their impact on investors and markets in the EU
97

What is the AIFMD about
• Direct regulation of
Alternative Investment Fund Managers (“AIFM”)
• Indirect regulation of
Alternative Investment Funds (“AIF”)
• Creation of a European market for alternative investments
via AIFM & AIF Passport
98

What has happened over the past 18 months
2 April 2009 G20 Meeting in London states that "all systemically important financial
institutions, markets, and instruments should be subject to an
appropriate degree of regulation and oversight.“
30 April 2009 EU Commission issues proposal for AIFMD
May 2009
to May 2010
EU Council of Ministers working group,
under Czech, Swedish and Spanish Presidencies (10 versions)
ECOFIN adopted “general approach” to AIFMD (18 May 2010)
September
2009 to
May 2010
EU Parliament’s Economic & Monetary Affairs Committee (“ECON”)
Report from Rapporteur M.Gauzes (139 amendments) (Nov 2009) &
MEPs (1531 amendments) (Jan 2010)
EP Legal Affairs Committee (“JURI”) (100 amendments) (Apr 2010)
ECON voted to adopt amended Gauzes report (17 May 10)
May to October
2010
24 Trilogue meetings took place, i.e. discussions between EU Parliament,
EU Council and EU Commission, chaired by Belgian EU Presidency, to agree
on final proposed text for AIFMD.
Agreement reached on 26 October 2010
99

AIFMD – Where are we now
10 November 2010 Planned Vote in European Parliament plenary session
Thereafter
[early 2011]
Council of Ministers must vote after EP plenary vote, to
adopt “common position”
Legal and translation services prepare the legislation for
publication (UCITS IV took 3 months)
[early 2011] EU Commission starts work on “Level 2” Delegated /
Implementing Acts, which specify in more detail how various
parts of AIFMD will be implemented.
The new European Securities Markets Authority (“ESMA”) will
also need to draft some binding technical standards
100

AIFMD – What is the implementation timescale
Q1 2011
Q1 2013
Q1 2014
Q1 2015
Q1 2017
Entry into force of the AIFMD
Member States must bring AIFMD into force by adopting
any necessary laws, regulations and administrative provisions
Existing AIFM must apply for authorisation before this date
ESMA to report
to EU Commission, EU Parliament & EU Council on workings of the EU Passport for EU-
AIFM and National Private Placement Regimes (NPPR) for non-EU-AIFM.
If positive report, EU Commission to specify date for start of Passport for non-EU AIF /
non-EU AIFM.
EU Commission to conduct a review
of application & scope of AIFMD, on basis of public consultation & discussions with
competent authorities
[Q1 2018] ESMA to report
to EU Commission, EU Parliament & EU Council on workings of the EU Passport and
NPPRs and possible termination of NPPRs.
If positive report, EU Commission to specify date for termination of NPPRs.
101

What does the AIFMD regulate
At the level of the AIFM
• Authorisation
• Capital adequacy
• Conduct of business
• Conflicts of interest
• Risk management
• Delegation
• Marketing
At the level of the AIF
• Liquidity management
• Valuation
• Depository
• Transparency
• Leverage
• Controlling interests
• Marketing provisions
102

Scope: the AIFMD applies to
I)
all EU AIFM, which manage one or more
(EU or Non-EU) AIF
II)
all non-EU AIFM, which manage one or
more EU AIF;
III)
all non-EU AIFM, which market one or
more (EU or Non-EU) AIF in the
European Union
But does not apply to:
• holding companies
• EU Pension Funds
• supranational institutions,
eg World Bank, IMF, ECB, EIB etc
• national central banks
• social security and pension systems
• employee participation / saving schemes
• securitisation special purpose entities
• AIFM managing only AIF held
directly / indirectly by AIFM group
• AIFM with < €100/500 Million AUM
• Family Office vehicles
103

Third country Regime (1): EU-AIFM
Manager AIF Investors
In
Scope
Marketing in EU
Requirements
EU EU EU YES Passport (2013) Full directive
EU
EU
EU
Non EU
Non
EU
Non
EU
YES None Full Directive
YES
None
EU Non EU EU YES
NPPR (2013-2018)
Possible passport
(2015)
Directive except Art. 21 (Depo)
& Art. 22 (Annual Report);
Co-op* agreements
Directive except Art. 21 (Depo),
+Co-op agreements/FATF
but entity appointed for depo
functions
Full Directive
+ Co-op / Tax** Agreements
/ FATF
NB Investment at own initiative of EU investors still permitted
* Agreements between competent authorities / 3rd countries where non-EU AIFM and/or non-EU AIF is based and MS
of Reference
** OECD Tax Convention Art 26 information exchange b/w competent authorities
104

Third country Regime (2): non EU-AIFM
Manager AIF Investors
Non
EU
Non
EU
Non
EU
Non
EU
EU
Non
EU
In
Scope
YES
EU EU YES
Non
EU
Non
EU
EU
Non
EU
YES
Marketing in EU
None
NPPR (2013-2018)
Possible passport
(2015)
NPPR (2013-2018)
Possible passport
(2015)
Requirements
Full Directive, MS of Reference +Legal
Representative
+ Co-op* / Tax **Agreements / FATF
Arts 22-24 (Transparency)
+ Co-op Agreement / FATF
Full Directive, MS of Reference
+ Co-op / Tax Agreements / FATF
Arts 22-24 (Transparency)
+ Co-op Agreement / FATF
Full Directive, MS of Reference
+Legal Representative
+ Co-op / Tax Agreements / FATF
NO None None
NB Investment at own initiative of EU investors still permitted
* Agreements between competent authorities / 3rd countries where non-EU AIFM and/or non-EU AIF is based and MS
of Reference
** OECD Tax Convention Art 26 information exchange b/w competent authorities
105

AIFMD – What are the implications for Japanese AIFM
CASE 1: JPN AIFM
using Cayman AIF with EU
investors
CASE 2: JPN AIFM using LUX
AIF with EU investors
Impact, high AIF compliance
risk, limited manager
compliance risk
Impact, limited manager compliance
risk, no AIF compliance risk
CASE 3: JPN AIFM using
Cayman w/o EU investors
No impact but outside AIFMD standard
CASE 4: JPN AIFM using LUX
AIF w/o EU investors
Impact, limited manager
compliance risk, no AIF risk
106

AIFMD – How will Luxembourg adapt
Lux AIF (UCI/SIF/SICAR)
Lux AIFM
Prudential supervision
Depositary requirement
Transparency requirements
Delegation
Passporting capabilities
Support services
Highest compatibility standard
Highest compatibility and
« UCITS ManCo » track record
Already standard
Already standard
Already standard
Already standard
Luxembourg sets global standard
for distribution/placement
2 nd largest fund center, global support
capabilities
107

8 November 2010
Listening AIF – to to investors
Redomiciliation

Re-domiciliation drivers
►(Instititutional) investor demand
►G20 / AIFMD
►Manager demand
►Branding
►Fund raising efforts, planning certainty
109

Re-Domiciliation from end 2007 to end 2009
Countries of origin
Target countries
Netherlands; 3% UK; 3%
Mauritius; 3%
Jersey; 3%
Germany; 3%
Bahamas; 3%
Mauritius; 3%
Malaysia; 3% Delaw are; 3%
France; 3%
Channel Islands;
3%
BVI; 3%
Luxembourg; 6%
Ireland; 6%
Cayman Islands;
50%
UK; 6%
Jersey; 6%
Luxembourg;
31%
Bermuda; 6%
Guernsey; 8%
Ireland; 6%
Guernsey; 8%
Hong Kong; 17%
BVI; 8%
Cayman Islands;
11%
Over 30% of re-domiciliations of funds between
2007-2009 were to Luxembourg
Source : Lipper

8 November 2010
ASSET Listening POOLING to investors

Global Asset Pooling Techniques
Luxembourg
Japanese
Pension Fund
Japanese
Pension Fund
• “SIF” structured with no share capital;
• “SIF” set up as an entity with no legal personality and
managed by a Luxembourg Manager;
• “SIF” is tax exempt in Luxembourg;
SIF
Securities
(US, EU, etc.)
Manager
Japan
• The “SIF” should be considered considered as
transparent from a Japanese tax point of view;
• The Japan treaty network should be applicable
thanks to the tax transparency of the SIF avoidance
of double taxation;
• Tax efficient structure allowing pension pooling for
many types of assets and securities.
112

Global Asset Pooling Techniques
113

Global Asset Pooling Techniques
• Quantitative benefits:
• Economies of scales at asset management level
• Simplification of trading (bulk trading)
• Reduction of administrative agents, custodian bank and advisors costs
• Allow better/higher assets diversification
• up to 70 basis points savings
• Qualitative benefits;
• Improve measurement/selection of service provider (e.g. assets
managers)
• Enable consistent/centralised corporate governance
114

Fund Governance
Developments
8 November 2010

8 November 2010
Listening QUESTIONS
to to investors
&
ANSWERS

Overall conclusions
• Enhanced trend of conversion from offshore centers from Luxembourg
• Access to worldwide distribution / placement
• Tax neutral
• Presence of global (alternative) asset managers
• Expertise and know-how
• Stable jurisdiction, predictable planning and long-term investment decisions
• “AIFMD Compatible”
High conversion into
Luxembourg
AIFMD Compatible

Thank you
Tokyo, 8th November 2010

Tokyo, 8th November 2010
Testimonial
Yoshikazu Chono
Product Planning & Development Department
Nomura Asset Management Co., Ltd.

Tokyo, 8th November 2010
Thank you for attending
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in a few days

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