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in writing that he is a sophisticated investor andeither invests a minimum of €125,000 in thespecialised investment fund or - in the event thatthe invested amount is lower - that he has beensubject to an assessment made by a creditinstitution, an investment firm or by amanagement company.2. Organisational FlexibilityA SIF may be structured as either:• A common fund (fonds commun de placementor “FCP”) managed by an investmentcompany• An investment company with variable capital(société d'investissement à capital variable or“SICAV”) to be established in the form ofeither a public limited company (sociétéanonyme) or a partnership limited by shares(société en commandite par actions) or aprivate limited company (société àresponsabilité limitée) or a cooperative in theform of a public limited company (sociétécoopérative sous forme de société anonyme),or• Any other legal form available underLuxembourg law, including an s.c.s. or ans.c.s.p., even though the latter is created bycontract and has no legal personality.The words “fonds d'investissement specialisé”or the abbreviation “FIS” must be added to thename and the title of the particular investmentfund.3. Capital and Payment of DividendsThe central administration of the SIF must besituated in Luxembourg. The minimum capitalmust reach €1,250,000 within a period of 12months following the approval by the CSSF.Although there are in principle no restrictions onthe payment of dividends, such payments toinvestors must not result in a decrease of theSIF’s capital below the minimum level of€1,250,000. The SIF must appoint a custodianhaving its registered office in Luxembourg orbeing the Luxembourg branch of a bank with itsregistered office in another Member State of theEU.4. Investment and Leverage RestrictionsA SIF may issue either equity or debt, and mayborrow for investment purposes. Generally,borrowing is limited to 200% of the SIF’s NAV,but may be increased to 400% if there is a highlevel of correlation between long positions andshort positions. The rules applicable tosubscription, redemption and distributions,valuation of assets and thecompartmentalisation of assets may be freelydetermined by the creator of the SIF in thearticles of incorporation (if a SICAV) or in themanagement regulations (if a FCP). The SIFmay create sub-funds, each with a differentinvestment policy. As regards the valuation ofthe SIF's assets, the only requirement providedby the SIF Law is that the valuation of its assetsbe made in accordance with the accountingprinciple of “fair value” (juste valeur).5. Investment PolicyAlthough the principle of risk diversificationremains applicable in general, the CSSFinterprets this in a flexible way. The offeringdocument (PPM) should include quantifiablerestrictions evidencing that the SIF is engagedin risk-spreading. Specifically, (i) with limitedexceptions, a SIF may not invest more than30% of its assets/commitments in securities ofthe same type issued by the same issuer, (ii) aSIF should not hold a short position in securitiesof the same type issued by the same issuerrepresenting more than 30% of its assets, and(iii) the SIF must ensure, when using financialderivatives, risk-spreading via appropriatediversification of the underlying assets.Otherwise, the creator of a SIF is free todetermine the investment policies of the SIF.SIFs may be launched with specific investmentpurposes such as the investment in transferablesecurities, money market instruments, realestate, hedge funds, funds of funds, privateequity, commodities, financial derivativeinstruments, debts, microfinance, etc.6. Management and Investment ManagerThe management of the SIF must be approvedby the CSSF, and will be, in principle, subject tothe Alternative Investment Fund Managers Law(see 10 infra). The persons constituting theBoard must be of sufficiently good repute andsufficiently experienced, and particularlyregarding the type of investments the SIFintends to make. In addition, the investmentmanager, entrusted with managing theinvestment portfolio, is subject to the priorapproval of the CSSF. The investment managermust demonstrate his good repute andprofessional experience, and must beauthorized or registered to carry out portfoliomanagement and be subject to “prudentialsupervision”.7. SupervisionTo acquire the authorisation of the CSSF, thefounding documents as well as the choice of thecustodian of the SIF must first be approved bythe CSSF.The SIF Law does not require specialisedinvestment funds to have a promoter withsignificant financial resources that would besubject to the approval of the CSSF.Consequently, SIFs may be created not only forbut also by sophisticated investors within the9