Private Equity in Monaco

Table

01

02

03

04

Introduction to Monaco

Private Equity Fund Structures

Fund Characteristics

Frequently Asked Questions

of Contents

1 | An Overview of Private Equity in Monaco

Welcometo Private Equity in Monaco

WhyMonaco?

✦ A diversified and stable economy

✦ Exceptional security and personal safety

✦ No income tax and capital gains tax

✦ Outstanding infrastructure for travel

✦ International and cosmopolitan financial centre

✦ Sophisticated, bilingual educational system

✦ Well-managed healthcare system

✦ Variety of cultural and sporting events

✦ European culture and timezone

Monaco is the second-smallest

independent state in the world,

member of the United Nations, the

Council of Europe and many other

international organisations. Unlike

some other Financial Centres the

Monegasque economy does not

depend solely on financial services.

Monaco boasts a small, open and

diversified economy with a well-

regulated and stable financial

marketplace.

In recent years Monaco has taken

important steps to further strengthen

an already comprehensive legal

framework and supervisory structure,

hence providing a well-regulated

financial environment for Private

Equity funds.

Monaco is well positioned to host

sophisticated investors, Private Equity

professionals and service providers.

The Monaco Private Equity & Venture

Capital Association (MVCA)

welcomes all new Private Equity

initiatives. Local service providers

such as Tempest Legal Services,

KPMG and STS Capital Partners are

available to advise on all legal,

accounting, transaction and

administrative processes needed to

establish operations in the

Principality.MONACO AT A GLANCE TABLE

Population: 36,950

Nationalities: 125

Territory (km2): 1.92

GDP ’13 (EUR bn): 4.94

GDP per capita ’13 (EUR): 64,082

Banking & finance sector (% / GDP ’13): 16.7

Active businesses: 4,497

Private sector turnover ‘13 (EUR bn): 13.3

An Overview of Private Equity in Monaco | 2

01 Introduction to Monaco

3 | An Overview of Private Equity in Monaco

02 Private Equity Fund Structures

Fund setup options

Manager in Monaco

Fund outside Monaco

Manager in Monaco

Fund in Monaco

* see on p.5 - ‘Supervision’

Management Company

(General Partner)

MONACO * ANYWHERE

Investors

(Limited Partner)

Private Equity Fund / of funds

Custodian Bank

MONACO *

Management Company

(General Partner)

Investors

(Limited Partner)

Private Equity Fund / of funds

Custodian Bank

ANYWHERE

Target Funds

Manager outside Monaco

Fund outside Monaco

MONACO LUXEMBOURG (Example)

Private Equity Fund / Holding

Company

Custodian Bank

Founders

Residents

Advisory Entity

Option 1 Option 3Option 2

Management Company

(General Partner)

Quick Reference Tablefor Private Equity Funds in Monaco

WhyPrivate Equity in Monaco?

✦ Well regulated financial market place

✦ Comprehensive supervisory structure

✦ Compliant with international best practices

✦ Emphasising investor protection

✦ Robust private banking and asset management sector

✦ In-depth service provider network

✦ Sophistication of service providers

03 Fund Characteristics

1. Regulator Financial Activities Supervisory Commission ("CCAF")

2. Permitted PE fund vehicles Mutual fund structure, constituted by management company and credit institution

3. Convention The Hague Convention on the Law Applicable to Trusts and on Their Recognition

An Overview of Private Equity in Monaco | 4

4. Fund regulatory requirements No licence, but declaration to CCAF required

5. Offering memorandum required? Yes, fund's by-laws / simplified prospectus

6. Auditor requirement? Yes, statutory fund auditor

7. Investment restrictions? Yes, portfolio diversification rules

8. Fund managers required? Yes

9. Custodian required? Yes, a local credit institution

10. Fund registration fees No

11. Management company Needs to be licensed with the CCAF

12. Annual shareholder meetings? Yes, for management company only

13. Number of directors? Minimum two

14. Minimum capital requirements? Yes, EUR 150K which can be used as working capital

15. Management fees Yes, but not capped

General

Fund

Management company

5 | An Overview of Private Equity in Monaco

03 Fund Characteristics

FUND FRAMEWORKFUND FRAMEWORKFUND FRAMEWORKFUND FRAMEWORK

Criteria Monaco Management Company Monaco Fund Custodian Bank

Legal framework Subject to the Act 1,338 of 7 September 2007 on financial activities

Subject to the Act 1,339 of 7 September 2007 on mutual funds and investment funds

✦ Subject to the Act 1,338 of 7 September 2007 on financial activities

✦ Subject to the regulations imposed by the Bank of France

Legal form Limited Company authorised to engage in collective management Mutual (contractual) fund structure without legal personality Limited company (SAM) or a branch of a foreign credit institution

Management licence requirements

✦ Creation of limited company✦ Operational base and offices in Monaco✦ Competent and experienced management team✦ Permanent personnel which executes authorised activities✦ Risk control and compliance department✦ Sufficient financial condition of direct and indirect shareholders✦ Minimum capital of EUR 150,000 (< EUR 250 m fund) increased

by EUR 40,000 for each EUR 200 m in additional fund assets ✦

Custodian bank requirements

✦ Credit institution based in Monaco✦ Sole depositary of the fund's assets ✦ Ensures that transactions are according to prospectus / law✦ Manages redemptions, liquidations and repurchases

Investors

✦ Professional investors and the management company✦ Individuals or legal entities that initially subscribe to at

least EUR 30,000:• Fund raisers• Provider to portfolio companies• Experienced PE investors

✦ Other investors subscribing to a minimum of EUR 500,000

Types of securities that may be issuedto investors

Units

NAV calculation ✦ At least twice a year (not required for dedicated funds)✦ No NAV publication for dedicated funds

Distributions of dividendsDistributions to investors are not subject to restrictions other than compliance with the minimum capital requirements and the provisions of the fund's by-laws / prospectus

Supervision

✦ Authorised by the Ministry of State✦ Licensed by the CCAF*✦ Annual reports to the CCAF and SICCFIN**✦ Controlled by the SICCFIN

✦ Declared to the CCAF✦ Annual report and periodical reports to the CCAF✦ CCAF may conduct investigations

✦ Licensed and controlled by the Bank of France (ACP***)✦ Annual reports to the SICCFIN✦ Controlled by the CCAF for the custody of the Fund

* Commission de Contrôle des Activités Financières - Monaco’s Financial Supervisory Commission

** Service d’Information et de Contrôle sur les Circuits Financiers - Information and Control Service of Financial Circuits

*** Autorité de Contrôle Prudentiel - French Prudential Supervisory Authority

An Overview of Private Equity in Monaco | 6

04 Frequently Asked Questions

Q: Who can establish a PE fund in Monaco?

A: A management company (existing asset manager or newly created entity) licensed to manage a Private Equity fund together with a local credit institution (Monegasque bank or international bank with local branch).

Q: Does Monaco have any tax cooperation agreements?

A: Andorra, Argentina, Australia, Austria, Bahamas, Belgium, Denmark, Finland, Faroe Islands, Germany, Greenland, Iceland, Liechtenstein, Luxemburg, Netherlands, Norway, San Marino, Samoa, Seychelles, St. Kitts & Nevis, Sweden, United States, Qatar

Q: Does Monaco have any tax information exchange agreements?

A: Andorra, Argentina, Australia, Austria, Bahamas, Belgium, Germany, USA, Liechtenstein, Netherlands, San Marino, Samoa (Sep 2010)

Q: Are there any benefits to transfer an existing Private Equity fund to Monaco?

A: The current (new) legislation provides an adapted general framework for creating and managing investment funds tailored to specific clients if needed.

Q: Are there any benefits of transfering an existing management company to Monaco?

A: Management companies in Monaco can manage foreign funds within a clear regulatory framework. The individual fund managers can enjoy benefits such as marketing and “Monaco branding” opportunities as well as attractive regulation regarding key management compensation.

Q: How do I establish a PE fund and how long does it take?

A: The fund establishment may involve obtaining authorisation and licence from the authorities to create a management company, and declaration to the Financial Activities Supervisory Commission (CCAF) to manage a fund. The PE fund is created by the management company and the local custodian. The fund establishment process typically takes between three to six months.

Q: How are PE funds taxed in Monaco?

A: PE funds are not subject to taxation.

Q: Are PE professionals interested in Monaco as a fund management destination?

A: More and more fund managers are analysing the current framework and consider Monaco as an opportunity to relocate all or part of their activities.

Private Equity in Monaco

Monaco Private Equity &

Venture Capital Association

3, ave de la Costa

MC 98000

Principality of Monaco

tel.: +377 9777 0333

fax: +377 9350 3226

www.mvca.asso.mc

KPMG Accountancy, Audits & Advisory

Tempest Legal Services Legal Advisory

STS Capital Partners M&A Advisory

February 2015

Special thanks to all those who contributed their

time and effort to make this brochure possible:

www.kpmg.mc

www.lg-legal.com

www.stscapital.com