1

Luxembourg, a global hub for financial servicesBishr ShiblaqHead of Dubai Representative Office

28 April 2011

2

1. The Grand Duchy of Luxembourg

Historical origins go back to the year 963 Constitutional Monarchy Founding member of NATO, the United

Nations and the European Union Seat of the European Court of Justice, the

European Court of Auditors, the Secretariat of the European Parliament and the European Investment Bank

Member of the Euro Zone Surface: 2,586 km2 / Population: 486,000 Workforce 310,000 (incl. 142,000 daily

border migrants) GDP per capita: € 62,626 (2008)

3

2. Country of origin of Luxembourg banks

146 credit institutions (banks) Total balance sheet : € 758 billion Employees: 26,254

France 13

Italy 9Switzerland 10Others 10

Belgium 10

USA 7

Netherlands 4

China 4Israel 3

Brazil 2 Denmark 2

Sweden 7UK; 8

Japan 5

Portugal 2

Luxembourg 5

Germany 44

Source: CSSF

4

3. Country of origin of Luxembourg PSF

306 other professionals of the financial sector (PSF) Total balance sheet: € 22 billion Employees : 14,159

Belgium 38

Others 38Netherlands 29

Germany 21

UK 24

USA 11

Liechtenstein 2Sweden 2

France 19

Switzerland 14

Denmark 5Italy 7

Luxembourg 96

Source: CSSF

5

4. The Luxembourg Financial Center - Players

3,705 undertakings for collective investment (UCI) – total AUM: € 2,208 billion (February 2011)

261 re-insurance companies and 96 insurance companies Other players incl. pension funds, securitization vehicles,

SICARs, SOPARFIs, private holding companies Great diversity of players 8th largest financial center in the world

6

5. The Luxembourg Financial Center - Activities

Fund formation, administration and management → Luxembourg ranked 2nd largest in the world (behind US)

Corporate and financial structuring → use of Luxembourg-based vehicles for M&A, securitization, venture capital and wealth management

Private banking → Luxembourg is the most important private banking center in the Eurozone and is ranked 2nd largest in the world for international private banking (UBS 2006: 15% market share behind Switzerland with 28%)

Bond listing → more than 30,000 securities listed with the LuxSE Clearing and settlement of securities’ transactions (Clearstream)

7

6. The Luxembourg Financial Center – Products

Collective investment schemes (UCITS / UCIs / SIFs); Investment companies in risk capital (SICARs); Securitization vehicles; Non-regulated investment vehicles (SOPARFIs); Life insurance products, insurance policy as an underlying for individual

portfolio management (unit linked policies); Private banking products: discretionary asset management – fiduciary

structures – banking privacy – private holding companies.

8

7. The Luxembourg Financial Center – Advantages

Luxembourg is one of the founding members of the EU; Onshore jurisdiction, with a recognized KYC and AML legislation; Efficient but flexible regulation; Accessible and responsive regulator (CSSF); Choice between regulated or non-regulated vehicles; Tax efficiency and one of the broadest treaty network available; Expertise in financial services, in particular investment funds,

internationally recognized.

9

Investment Funds: Legal and Regulatory updateFlorence StainierPartner, Investment Funds

28 April 2011

10

Agenda

I. Luxembourg fund industry

II. UCITS UpdateA. OverviewB. Update about CSSF supervisionC. Re-domiciliation in the air

III. From UCITS to UCITS IV… and UCITS V

A. UCITS IV in a nutshellB. Simplified Notification ProcedureC. Key Investor Information DocumentD. Merger and Master-Feeder structures

IV. Miscellaneous

11

I. Luxembourg fund industry

• 3.667 investment funds

• 12.937 fund units

• 2.198,99 billion euros in assets under management

Figures as at November 30, 2010 Source: CSSF

… at a glance:

12

20 years of sustained growthNet assets of Luxembourg domiciled UCIs

Figures as at November 30, 2010 Source: CSSF

0

500000

1000000

1500000

2000000

2500000

€bill

ion

December 20102 198.994

Growth rate 12 months

19.45%

I. Luxembourg fund industry (2)

13

20 years of sustained growthNumber of Luxembourg domiciled UCIs

Figures as at November 30, 2010 Source: CSSF

0

500

1000

1500

2000

2500

3000

3500

4000

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2001

2003

2004

2005

2006

2007

2008

2009

Dec

. 201

0

Num

ber o

f fun

ds

Growth rate 12 months

5.89%

December 20103667

I. Luxembourg fund industry (3)

14

Luxembourg: the hub for international fund distribution

1,3

2,1

2,5

12,9

76,2

0 20 40 60 80 100

BE

FR

UK

IE

LU

76.2% of all UCITS registered in at least 3 countries

(including home states) are Luxembourg funds

I. Luxembourg fund industry (4)

15

Luxembourg: No 1 for global fund distributionLuxembourg market share of cross-border funds for public distribution

Figures as at November 30, 2010 Source: CSSF

I. Luxembourg fund industry (5)

16

II. UCITS UpdateA. Overview

UCITS

Strong SupervisoryFramework

High RiskDiversification

Retail Investors

TS, MMI, UCI, Cash, Derivatives

PassportEU

EEA, Asia, Middle East, Americas

17

II. UCITS Update (2)

UCITS

B. Update about CSSF Supervision

Management Company

InvestmentManager

• Subject to prudentialsupervision

• Cooperation between the UCITS supervisory authorityand the supervisory authority of the investment manager

18

GOOD REASONS TO RE-DOMICILE INLUXEMBOURG

Solid regulation and continuous prudential supervision

Reputation: stable jurisdiction, predictable planning and long term investment decisions

Attractive tax regime

Experienced fund administration, custody and transfer agency services

Strongly developed compliance and risk management structures

Expertise and know-how, commitment to excellence and reliability

Access to worldwide distribution

QualityBrand

C. Re-domiciliation in the air…

UCITS

II. UCITS Update (3)

TrackRecord

?

and Master-Feeder…

19

III. From UCITS to UCITS IV… and UCITS V

Driving ForcesPermit cross-border

offering of open-ended investment funds to EU

investors

More asset classes eligible (bank deposits, units of other

UCIs, MM and use of derivatives)

Permit industry consolidation, improve efficiency and increase

investor protection

Benefits Harmonization of

investor protection rules Marketing through

simple notification process - passport

Widening of investment power and product offering in UCITS

Enhanced risk management procedures

Principal amendments to UCITS regime: Simplified notification

procedures KII EU-wide fund merger

regime Management company

passport Master-Feeder

structures

UCITS 20 December 1985

UCITS III21 January 2002

UCITS IV13 July 2009

UCITS V

20

Key Investor Information

NotificationProcedure

Fund Mergers

Master-Feeder

ManCoPassport R

EGU

LATO

RC

OO

RD

INAT

ION

Date of Implementation : July 1st, 2011

Reduce Administrative

Burden

Increase

Investor

Protection

IncreaseMarket

Efficiency

III. From UCITS to UCITS IV… and UCITS V (2)A. UCITS IV – in a nutshell

21

III. From UCITS to UCITS IV… and UCITS V (3)B. Simplified Notification Procedure

• Objective: improve time to market / reduction of costs

• Regulator to regulator notification

• Overal efficiency

22

III. From UCITS to UCITS IV… and UCITS V (4)C. Key Investor Information Document (KIID)

• Objective: improve retail investors protection and information

• Standard & harmonized format & presentation

• Maximum 2 pages long

• Comprehensible form & presentation: short & simple

23

III. From UCITS to UCITS IV… and UCITS V (5)D. Mergers and Master-Feeder structures

• Objective: consolidation of EU fund industry – efficiencies –

economies of scale

• Enhancement of the ability to complete cross-border fund

mergers

• Adoption of a model for facilitating master feeder structures

UCITS V TO COME

24

IV. Miscellaneous

A. Products trendB. Cross investmentsC. P Shares

25

The Alternative Investment Fund Managers DirectiveA special focus on private equity funds

Pierre BeisselPartner

28 April 2011

26

The AIFMD in the context of the European regulatory framework

MiFID review replies flood

in – a record?

Investors alarmed over EU reform

process

Asset managers aim to navigate

funds through big rocks ahead

Europe prepares for governance

green paper

The AIFMD – a benefit or a

hazard?

Insurers still uneasy over Solvency II

EU urged to go ahead with

tougher bank rules

European regulations on OTC derivatives spark

disquiet

UCITS IV paperwork will

surprise regulators

27

Similar stories elsewhere....

United States: tougher banking

regulations

New Investment Funds Regulations in

the UAE

United States:Dodd-Franck

challenges ahead

Qatar: QFCRA’s newregime for CIS

Impact of the AIFMD on UAE

based managers ???

......ESCA approved

local distributors...

[....] Executive compensation under review...

Asia....

28

Creation of a harmonised and stringent regulatory and supervisory framework for AIFM

AIFMD = a Managers’ Directive rather than a Product Directive

Creation of a passport for European and third country managers

The regulatory approach adopted by the AIFMD

29

In scope:

EU AIFM managing EU (LUX) AIF or non-EU AIF

Non-EU AIFM (e.g., DUBAI) managing EU (LUX) AIF

Non-EU AIFM (DUBAI) marketing non-EU AIF in the EU

The regulatory approach adopted by the AIFMD

30

INDUSTRY FIGURES

31

The European Fund Industry in numbers(as of 31 December 2010)

Non-UCITS

Country Assets € millions

Germany 876,105

Luxembourg 318,382

Ireland 204,795

France 191,345

UK 118,556

Switzerland 57,218

Italy 56,701

Spain 7,231

Sweden 3,643

Others 200,914

Total: 2,034,890

UCITS

Country Assets € millions

Market share in %

Luxembourg 1,880,612 31.4%

France 1,210,280 20.2%

Ireland 758,531 12.7%

UK 675,401 11.3%

Germany 249,748 4.2%

Switzerland 195,998 3.3%

Italy 175,358 2.9%

Sweden 162,446 2.7%

Spain 162,337 2.7%

Others 518,919 7.1%

Total: 5,989,630 100%

Source: EFAMA Quarterly Statistical Release, February 2011, No. 44

32

The European (AIF AND NON-AIF) Fund Industry in numbers

33

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

Luxembourg – the leading European private equity hub

US$ 40 billion in assets Over 300 regulated funds

34

AIFMD IMPACT IN DUBAI ?

35

Dubai PE manager has no European investors for the AIF it

manages: NO IMPACT

Dubai PE manager has European investors in the AIF it

manages: IMPACT

Dubai PE manager wishes to use a European alternative

investment fund (AIF) vehicle/regime without EU investors: [NO]

IMPACT

Dubai PE manager wishes to use a European alternative

investment fund (AIF) vehicle/regime with EU investors: IMPACT

Consequences for Dubai based PE manager

36

How can Dubai and Luxembourg work together under

the AIFMD?

37

Luxembourg: distribution platform and gateway to Europe for Dubai PE manager

2013

2015

EU Passport

LUX AIF

EU Passport

LUX AIFM

Dubai AIFM

LUX AIF

for Dubai AIF

Dubai AIFLUX AIFMfor and

for and

38

How can Dubai and Luxembourg work together outside

the AIFMD?

39

Luxembourg: European PE acquisition gateway

DubaiManager

InvestorsNon EU

LUXCO

EU TARGET

AIF

LEVEL 1

LEVEL 2

LEVEL 3

LEVEL 4

40

Luxembourg: European PE acquisition gateway

Luxembourg is Europe’s premier acquisition and financing hub:

extensive tax treaty networktax efficient entry level and exit planningfiscal and legal planning/structuring flexibility/certainty

AIFMD applies to AIFM and indirectly to AIF, but:

does not apply to special purpose acquisition vehicles (SPV)also provides for exceptions and exemptions

41

Challenges & Opportunities

42

Positioning as AIF pan-European and global distribution platform efficient network of MOUs and cooperation arrangements with “asset manager”

jurisdictions (US, Hong Kong, Switzerland, Channel Islands, Singapore, UAE etc.)

Positioning as center of excellence for AIFM leverage on strong UCITS position creation of ManCo (AIFM) with appropriate substance and monitoring

requirements center of excellence in risk management

Adequate regulatory framework for service providers (central administration, custodian banks): focus on monitoring functions flexible outsourcing intra-group delegation

Challenges and opportunities for Luxembourg

43

Timeline

44

November2010

December2010

November2011

July2013

June 2012

Adoption of

Directive

Start of work on Level 2

legislation

ESMA advice to

EC expected

Transpo-sition into national

law

Issue of Level 2

measures by EC

expected

Timeline

July2011

Planned entry into

force

2015

Passport for third country AIFM +

AIF

2018

End of private place-ment

regimes

45

Thank you for your attention!

Questions & answers

46

Tax structuring: recent developments and country focus on Turkey

Thierry LesagePartner

28 April 2011

47

Part. 1General aspects

48

Flexible and secure tax environment

Advantageous domestic tax system

No need for specific legislation for shari’ah complianttransactions as the tax system is based on

an economic approach; anda substance over form principle

Well-developed tax treaty network

Key strengths of Luxembourg as holding andfinancing location

49

Extensive participation exemption regime (for dividendsincome, capital gains, outbound dividend payments and networth tax purposes)

Several tax incentives (e.g. 80% exemption for IP income)

No exit taxation enabling appropriate repatriation plannings

Lowest VAT rate within the European Union (15%)

Attractive tax regime for different investment vehicles andinvestors (e.g. family wealth management companies,securitization vehicles, SICARs, UCITs…)

Luxembourg offers for shari’ah compliant transactions

50

Income tax rate 28.80% (CIT + MBT; Luxembourg city)

Net Wealth tax rate 0.5%

Capital duty No

WHT on dividend 15% (with several exemptions/reductions)

WHT on interest 0% (very limited exceptions)

WHT on royalties 0%

Tax certainty can be achieved through an efficient advance tax agreement practice

Double tax treaties in force 62

Luxembourg basic tax features

51

Double tax treaty network – treaties in force

ArmeniaAustria

AzerbaijanBahrain Belgium Brazil

Bulgaria Canada China

Czech Republic Denmark Estonia Finland FranceGeorgia

Germany Greece

Hong Kong HungaryIcelandIndia

IndonesiaIrelandIsraelItaly

JapanLatvia

LiechtensteinLithuania MalaysiaMonaco

MaltaMauritiusMexico

MoldovaMongoliaMorocco

NetherlandsNorwayPoland

PortugalQatar

RomaniaRussia

San MarinoSingapore

SlovakiaSlovenia

South AfricaSouth Korea

SpainSweden

SwitzerlandThailand

Trinidad and TobagoTunisia Turkey

United Arab EmiratesUnited KingdomUnited States

UzbekistanViet-Nam

52

Double tax treaty network – treaties not in force yet

Albania Kazakhstan Macedonia Syria

Argentina Kuwait Pakistan Ukraine

Barbados Kyrgyzstan Panama Uruguay

Cyprus Lebanon Serbia and Montenegro

53

Part. 2 Recent developments on intra-group

financing

54

Circular 164/2 LIR on intra-group financingtransactions

On 28 January 2011, the Luxembourg tax authorities issued the Circular164/2 LIR on the tax treatment of companies engaged in intra-groupfinancing transactions.

The Circular introduces transfer pricing guidelines for the determination ofarm’s length character of intra-group financing transactions.

New rules are based on article 9 of the OECD Model Convention and theOECD Transfer Pricing Guidelines for Multinational Enterprises and TaxAdministrations.

The Circular addresses the tax treatment of intra-group financingtransactions and governs the prior clearance thereof through advancetransfer pricing confirmations.

55

Scope of the Circular 164/2 LIR

The provisions of the Circular apply to all “entities engaged inintra-group financing transactions ”

Four conditions must be fulfilled:

1. Granting loans

2. as a main activity

3. to direct or indirect affiliated / controlled companies

4. Debt-funded

56

Arm’s length character determinationComparability analysis

As per the Circular, two types of comparability analysis are available tojustify the arm’s length character of the concerned transactions:

1. Comparable uncontrolled transaction analysis = comparison of thetransactions to those realised by an entity exercising a comparable activity,such as a financial company subject to the regulatory requirements of theCSSF.

2. Indirect comparability analysis = justifying the transaction by taking intoaccount tangible and economics factors/criteria :

prudential ratio of the entity credit risk exposure additional expenses (solvability) specific contractual duties/provisions exposure on foreign currency exchange

57

Advance Pricing Agreement (APA)

Conditions to be fulfilled to obtain an APA in Luxembourg:

1. Composition of the executive board : predominance of Luxembourg managers/directors

2. Manager / Director with well established professional skills and power to act

3. Key decisions on the conduct of the business are taken in Luxembourg

4. Bank account in Luxembourg

5. Respect of the general tax filing obligations

6. Not be a fiscal resident in another State

7. Appropriate equity amount given the risks associated to the activities performed= 1% x nominal value of financing activity or max Euro 2 million

58

Documents required

Following documents are required in order to apply for an APA:

Proper information on the taxpayer and the related entities

Detailed description of the transactions

The name of all States involved

Presentation of the legal structure of the group

The fiscal years covered by the APA

A transfer pricing study respecting the OECD guidelines

A general description of the relevant market situation

An analysis of all other relevant tax problems associated to the activitiesperformed

Declaration that the information transmitted is complete and truthful

59

Validity of the APA

The duration of the validity of the APA depends on each individual case,but may not exceed 5 years

Once 5-year period has expired, the Luxembourg tax authorities may,upon request, grant a new confirmation for a maximum period of 5 years

The APA has a binding effect on the Luxembourg tax authorities unless:

– the situation or the operations described were incomplete or notaccurate;

– the essential elements of the operations differ from the request; or– the confirmation is not complying with international law.

60

Part. 3Shari’ah-compliant transactions

61

Tax Circular on Islamic finance

The Luxembourg tax authorities published an administrativeCircular related to shar’iah compliant finance instruments (CircularL.G.-A n 55 dated 12 January 2010)

In particular, the Circular clarifies the Luxembourg direct taxtreatment of murabaha and sukuk:

Economic approach confirmed Luxembourg UCIs investing in Islamic finance instruments are

excluded from the scope of the Circular

62

Analysed as debt instrument from a Luxembourg tax perspective

Thus, the remuneration paid to the sukuk holder = interest payment

Remuneration is tax deductible at the level of the sukuk issuer

Not subject to a WHT in Luxembourg

Remuneration = income from transferable securities Luxembourg tax provisions related to typical silent partners and

profit-linked obligations are not applicable

Tax treatment of Sukuk

63

Sukuk financing structure Tax treatment

LuxCo fully-taxable entity subject tocorporate income taxes and net worthtax, but profits from the Eligible Assets repatriated

through PPN / sukuk no withholding tax on payments under the

PPN /sukuk payments under the PPN / sukuk are

deductible expenses return on the PPN / sukuk equal to the

net profit derived from the Eligible Assetsless an arm’s length margin

only taxation of the margin Upon exit, generally (i) no withholding

tax on distribution of liquidation proceedsand (ii) no taxation of capital gain onLuxCo shares realised by non-residentshareholders.

LuxCo

Equity & Profit-participating notes “PPN”/ sukuk

Investors

Eligible Assets Eligible Assets

64

Tax treatment of murabaha transaction

Analysed as a sale, the gain i.e. the difference betweenacquisition and sales price realised by the financing entity underthe murabaha transaction – the “Gain” – being as a rule taxableupon signature of the agreement

However, the Gain being the remuneration of a deferral ofpayment (comparable to an interest), in such case possibility of adeferred taxation i.e. taxation on a straight-line basis during theperiod of the deferral of payment

65

Tax treatment of murabaha transaction

The Gain qualifies as interest if:

pursuant to the murabaha agreement, it is clear that the financing entity acquiring theasset sells it back simultaneously or in a period not exceeding 6 months;

the murabaha agreement distinguishes between (i) the remuneration of the financingentity for its intermediation (ii) the acquisition price paid by the financing entity and(iii) the acquisition price paid by the investor;

the Gain of the financing entity must be clearly stated, known and accepted by bothparties;

the Gain must be expressly qualified as being the counterpart of the service rendered tothe client and resulting from the deferral of payment granted to the client; and

from an accounting and tax perspective, the Gain is accounted for on a straight-linebasis by the financing entity, irrespective of the actual payments made.

66

Murabaha financing structure Tax treatment

Profit of EuCo repatriated to LuxCo throughe.g. dividends, interest, royalties Generally, no local withholding tax and

application of EU Directives Exemption for dividend income, capital gains

and liquidation proceeds from EUCo at the levelof LuxCo

At the level of LuxCo, profits from EUCooffset by (i) payments under the murabahaand (ii) payments under the PPN Remuneration on murabaha and PPN, not

subject to withholding taxes Remuneration on murabaha and PPN generally

deductible expenses Possible withholding tax exemption on dividends

under an applicable double tax treaty

Upon exit, generally no withholding tax ondistribution of liquidation proceeds and notaxation of capital gain on LuxCo shares

Investment Bank Investors

LuxCo

EUCo

Equity & PPN

Seller

Cash payment100

Transfer ofEUCo

Dividend, interest,royalties

67

Part. 4Country focus - Turkey

68

DTT between Luxembourg and Turkey – Key features

Exchange of information

Promulgation in March 2011 by Turkish Official Gazette of theAmendment Protocol of the DTT (signed on 30 September 2009)concerning the exchange of information.

Turkish tax authorities should start treating Luxembourg as an OECDwhite list jurisdiction.

“Anti-tax haven” provisions should not apply to payments from Turkishcompanies to Luxembourg companies.

69

DTT between Luxembourg and Turkey – Key featuresWithholding taxes rates

Dividends (Art. 10): - 10% of the gross amount of the dividends if the beneficial owner is a company

which holds directly at least 25% of the capital of the company paying thedividend

- 20% of the gross amount of the dividends in all others cases

Interest (Art. 11):- 10% of the gross amount of the interest if it is paid on a loan made for a period

of more than 2 years- 15% of the gross amount of the interest in all others cases

Royalties (Art. 12):- 10 % of the gross amount if the beneficial owner is resident in Luxembourg

70

DTT between Luxembourg and Turkey – Key featuresCapital gains on disposal of participation (Art. 13):

Disposal before 12 months:

– Gains may become subject to tax in Turkey– Luxembourg should generally exempt the gain by application of the DTT

Disposal after 12 months:

– No taxation in Turkey nor in Luxembourg (Luxembourg participationexemption should be available)

71

Acquisition structure exampleDescription Investor incorporates or buys SPV Investor funds SPV with a mix of equity

and a profit participating loan ( “PPL”) SPV acquires the TargetTax treatment The PPL’s interest has two components:

– a fixed annual interest rate of 0.5-1%– a profit participating interest tracking the income

that SPV derives from specific assets

Repatriation of profits through thepayment of the variable interest

No WHT levied on interest paymentunder the PPL nor its reimbursement

A range of instruments can be used (e.g.convertible bonds, total return swaps) asan alternative to a PPL

SPV(Luxembourg)

Target(Turkey)

Investor(UAE)

PPL

72

Acquisition 6 months 12 months

Sale of SPV

Sale of Turkish Target

Timeline and exit gains

Gains potentially subject to tax in Luxembourg

Gains not subject to tax in Luxembourg and Turkey

- Gains subject to tax inTurkey- Luxembourg should exempt the gain by application

of the DTT

Gains not subject to tax in Luxembourg and Turkey

73

Islamic Finance in Luxembourg: Case studies

Bishr Shiblaq, Head of Dubai Representative Office

28 April 2011

74

Overview (Part 1) – Islamic Finance in Luxembourg1978 First Islamic finance institution established in a Western country

(Islamic Banking System, later Islamic Finance House Universal Holdings S.A.)

1983 First Shari’a compliant insurance company in a Western country (Solidarity Takafol S.A.)

1990 Other renowned Islamic finance institutions set up Luxembourg establishments:Faisal Finance and FWU Group

2002 LuxSE, first Western stock exchange to enter the Sukuk market(Malaysia Global Sukuk)

2010 Luxembourg Central Bank first EU Central Bank to become a member of the Islamic Financial Services Board (IFSB)

2010 Luxembourg Tax Circular clarifying the treatment Murabaha and Sukuk

2011 Luxembourg banks requested to join the Islamic Liquidity Management Corporation (Objective: Issuance of financial instruments to provide Islamicinstitutions with liquidity management solutions)

2011 First Annual IFSB meeting in a Western country (May 2011)

75

Overview (Part 2) – Islamic Finance in Luxembourg

40 Shari’a compliant funds and subfunds registered in Luxembourg

16 Sukuk listed on the Luxembourg stock exchange

1 Shari’a compliant insurance company

Specialised teams and dedicated services for Shari’a compliant structures and funds offered by Luxembourg Service Providers, including Arendt & Medernach

76

Islamic Banks

Corporate Investors

Private Equity Firms

HNWI

Governmental Entities

Semi-gov. Entities

(… and others)

Residential Commercial Hotels Shopping CentersInfrastructure

Securitisations

Private Equity

Islamic Funds

Real Estate

Overview of Islamic finance cases

Real Estate -Unregulated Acquisition Structures

77

78

Real Estate Acquisition in Europe

UAEUAE

LuxCo

ItalyCo

LuxCo

FrenchCo

GCC

PPL and IFL

Luxembourg

ShareholderLoan

Target Jurisdiction

IFL

Equity (1%) Convertible loan (99%)

ShareholderLoan

79

Project Company(Jersey)

LuxCo

Conventional Funding Shari’a Compliant Funding

CaymanCo

Private Placement

Memorandum

JVCO(Cayman)

Finance Company

(Luxembourg)

Joint Venture Agreement

Occupational Tenants

Real Estate: UK Mixed-Used Development

Private Equity

80

81

Private Equity: Participation in Turkish companies

Islamic Bank(GCC)

LuxCo

Target Co 1(Turkey)

Target Co2(Turkey)

TargetCo 3(Turkey)

100%

82

Private Equity: Shari’a compliant transaction GCC-Turkey

Investment Bank & Investors

Offshore SPV

LuxCo 1

Luxco 2

Real Estate Private Equity Company

Equity, Murabaha

Murabaha & Mudaraba

83

Soparfi(Luxembourg)

JV Soparfi(Luxembourg)

50%

RusSPV1(Russia)

SPV1

InvestmentCo

100%

100% (less one share)

Partner Soparfi(Luxembourg)

50%

QatarCo(Qatar)

Finco(Luxembourg)

100%

100%

Target Group

PanamaCo(Panama)Interest Free Loan

Fixed Interest Loanat 4%

Fixed Interest Loan

Fixed Interest Loan at 4,25%(4% plus 0,25% taxable margin*)

Participation Loan

Interest Free Loan

Payment Delegation AgreementPrivate Equity: Investment into Russian Companies

Islamic Funds &Shari’a compliant platforms

84

85

Islamic Funds in LuxembourgLuxembourg offers a full range of regulated investment vehicles perfectly suitable for the structuring of Islamic transactions and activities and worldwide distribution to retail and institutional investors

Islamic investment funds provide for special features: Shari’a board: a Shari’a board may be appointed in any type of Luxembourg

regulated vehicles, in order to validate the structure of the fund and its investment policy from a Shari’a perspective

Ban of haram activities: criteria for selecting the investments of the fund and excluding haram activities may also be provided as the basics of the investment policy of an investment fund

Specific limits: exclusion of riba may be ensured by providing some ratios of illiquid assets to be complied with. Interdiction of gharar may also be achieved by express prohibitions included in the sales documents

Purification of haram income: purification processes are commonly accepted and implemented by Luxembourg authorities and service providers and may be described in sales documents

Luxembourg law perfectly allows the integration of such specifc features inconventional regulated vehicles.

86

Islamic Funds: Luxembourg share in Islamic funds

Source: E&Y Islamic Funds Report 2009

87

Development of several Islamic Platforms in Luxembourg

New Trend to establish platforms for different Islamic products

Islamic Fund Platforms for UCITS and SIF:

Amiri Sharia EquitiesPlatform IDO Shariah Investment Platform Luxembourg Alternatives UCITS Platform – LAUP Luxembourg Financial Group InvAG TGV

Sukuk platforms on the basis of the Luxembourg Securisation Law

Platform for Takaful and Retakaful

Sukuk Structures based on the Luxembourg Securitisation Law

88

89

Sukuk al Mudaraba/ Musharaka structure

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Sukuk al Ijara structure

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Sukuk Issuance Platforms in Luxembourg

Deutsche Bank: Al Miyar S.A.

Dar Al Istithmar: Al Waseelah Capital S.A.

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Sukuk Issuance Platform

Listing of Sukuk

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Listing of Sukuk

Luxembourg Stock Exchange (LuxSE): Founded in 1929 Leading Listing Market for bonds, securities and sukuk with 46 % of

international bonds in Europe being listed thereon Over 4200 issuers from 105 different countries More than 55 countries have at least one issue of their sovereign debt listed

thereon First Western stock exchange to enter the sukuk market

LuxSE offers broad listing options via its two markets:

Regulated Market:

Euro MTF: became the preferred listing platform for sukuk

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Listing of Sukuk

Listing and admission to trading of sukuk on either of the marketsdoes not trigger any additional requirements

The content of the prospectus will vary according to the structure of the transaction underlying the issue of the particular sukuk

CSSF clarification (treated as asset backed securities for purposes of approval of the prospectus)

Today the LuxSE has become one of the most important in Europe for sukuk listing

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Sukuk listed in Luxembourg Sukuk issue Curr. Size Issued Maturity

Salam Bounian Development Company Sukuk Ltd USD 137,500,000 2008 2018

Qreic Sukuk LLC, Qatar USD 270,000,000 2006 2016

Petronas Global Sukuk Ltd USD 1,500,000,000 2009 2014

Wings FZCO USD 550,000,000 2005 2012

Gold Sukuk DMCC USD 200,000,000 2005 2010

IDB Trust Services USD 500,000,000 2005 2010

Pakistan International Sukuk Co USD 600,000,000 2005 2010

Qatar Global Sukuk USD 700,000,000 2003 2010

BMA International Sukuk Company USD 250,000,000 2004 2009

Dubai Global Sukuk FZCO USD 1,000,000,000 2004 2009

Sarawak Corporate Sukuk, Malaysia USD 350,000,000 2004 2009

Stichting Sachsen-Anhalt EUR 100,000,000 2004 2009

Tabreed Financing Corporation, UAE USD 200,000,000 2004 2009

Solidarity Trust Services USD 400,000,000 2003 2008

Malaysia Global Sukuk USD 600,000,000 2002 2007

Al My'iar Capital SA (programme for issuing secs) USD

Establishment of an Islamic Bank / Professional of the Financial

Sector in Luxembourg

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Establishment of an Islamic Bank/ PSF in Luxembourg

Many GCC inquiries regarding the establishment of an Islamic Bank in Luxembourg, but to date none of these projects has been realised.

As of March 2011, 146 conventional banks and almost 300 professionals of the financial sectors (PSF) in Luxembourg

21 types of PSF an d 6 types of support PSF that can be created in Luxembourg

No additional Luxembourg requirements to be fullfilled for the establishment of an Islamic Bank.

Advantages: Banking license in the heart of the EU Branches in the EU that can be opened more easily Access to the EU markets: European Passport for Credit Institutions and PSF

qualifying as Investment Firms

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Islamic Bank / PSF: Using the European Passport

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ShareholdersShareholders

Shareholders

Private Placement of Shares

Luxembourg Holding Company S.A.

Real Estate Education Other

BanksTakaful Re-Takaful

Holding Company Other

Islamic Bank

Holding Structure for a foreign Islamic Bank

Thank you

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