The article discusses Mangrove Capital Partners' success with the IPO of Wix on the NASDAQ in November 2013. Mangrove is a Luxembourg-based venture capital firm that is famous for its role in the Skype success story. The article provides key figures for Wix, which now has 40 million users, 576 employees and a value of over $800 million. It then interviews Hans-Jürgen Schmitz, Mangrove's co-founder and managing partner, who discusses how Mangrove first got involved with Wix in 2007 after being approached about the company during an exploration of the Israeli market. Mangrove purchased an initial stake in Wix and later led a financing round.

1. capital
V#3 The magazine of the Luxembourg Private Equity & Venture Capital Association
AFTER Skype,
Wix!
A Nasdaq IPO success

2. Need help with fund formation?
Loyens & Loeff is a leading Luxembourg law firm providing comprehensive and fully integrated
legal and tax advice in relation to fund structuring. We assist our clients in the structuring and
implementation of alternative funds pursuing all major investment strategies including private equity,
real estate, hedge, infrastructure, mezzanine, healthcare, renewable and alternative energy as well as
UCITS.
Our investment management practice is the largest in the Benelux, including one of the largest teams
in Luxembourg, offering a full range of investment management services.
Contact: Loyens & Loeff Luxembourg S.à r.l., 18-20 rue Edward Steichen, L-2540 Luxembourg, T +352 466 230
www.loyensloeff.lu

3. Content
5. Editorial
Welcome to capitalV
6. CSSF interview
AIFMD: transitioning to the new law
8. AIFMD
Luxembourg as the next trade mark for Alternative
Investment Funds
10. Interview
Capitalising on the Luxembourg brand
12. Cover story
Mangrove Capital Partners: after Skype, Wix!
16. Regulatory
• Is the Luxembourg Special Limited Partnership
really so special?
• Time is now
20. Domiciliation
• Setting up in Luxembourg
22. Trends
The wisdom of crowdfunding?
24. Life In Luxembourg
• Living in Luxembourg
• University: 10 years of new thinking
28. BusinessWomen
Betty Fontaine: Brewer from father to daughter
30. Event Calendar
What, When, Where
#3 – capitalV – 3
capitalV
The magazine of LPEA
Editorial: Avishai Abrahami, Jean-Marc Goy,
Arnaud Bon, Luca Gallinelli, Paul Junck,
Gérard Lorent, Guillermo Morales,
Pierre Weimerskirch, Alexandre Prost-Gargoz,
Hans-Jürgen Schmitz, François Pfister,
360Crossmedia
Conception & coordination: 360Crossmedia
Artistic Director: Franck Widling
Cover photo: © WIX
Disclaimer : To the fullest extent permissible under applicable law, LPEA
does not accept any responsibility or liability of any kind, with respect to
the accuracy or completeness of the information and data from this
documentation. The information and data provided in this documentation
are for general information purposes. It is not investment advice nor can it
take account of your own particular circumstances. If you require any
advice, you should contact a financial or other professional adviser. No
material in this documentation is an offer or solicitation to buy or sell any
professional services, financial products or investments.

4. Bonn & Schmitt is a leading independent
Luxembourg law firm with a broad national
and international client base.
In particular, in the area of Investment Funds & Private Equity the firm
can evidence ample experience. We are assisting numerous interna-tional
private equity clients pertaining to their structuring, financing and
taxation issues. The different teams advising consist of highly qualified
lawyers from different countries including Belgium, France, Germany,
Ireland, Italy, Sweden and others.
Initial private equity deals for the firm appeared in the mid 1990’s.
Bonn & Schmitt advised 10 years ago in the set-up of a successful
Italian - Chinese private equity venture, which also saw follow-up
transactions until today. Furthermore, the private equity department has
constantly grown over the last almost 20 years to fully support and propel
the business development of our clients.
Our approach is to use small but effective teams with permanent
senior lawyer presence adapting to the velocity of each private equity
transaction accompanied by us.
Clients and the market have appreciated our work in several nomi-nations
for awards recognizing innovative and cross-border advice.
Bonn & Schmitt was awarded the IFLR Europe High Yield Deal of the Year
Award 2012 pertaining to the sale of a German cable company by our
private equity client to a new owner.
We also were nominated for IFLR Europe Private Equity Deal of the Year
Award 2013 pertaining to our assistance to a client purchasing a German
medical group. Finally, we received the IFLR Europe Luxembourg Law
Firm of the Year Award 2013, which also was partly due to our successful
private equity work carried out last year.
PRACTICE AREAS
BONN & SCHMITT is a full service commercial law firm that practices all
aspects of business law, with special expertise in:
Corporate Corporate Law
Mergers & Acquisitions
Insolvency and Restructuring
Tax Corporate and International Tax Advisory
Indirect Taxes and VAT
Tax Litigation
Banking, Finance Banking and Finance
and Regulation Structured Finance and Securitisation
Capital Markets, Securities Law
Insurance
Investment Management & Asset Management and Services
P rivate Equity Investment Funds
Litigation and Commercial Litigation
Dispute Resolution Finance and Securities Litigation
Employment and Benefits
IP and IT
BONN & SCHMITT 22-24 Rives de Clausen
L-2165 Luxembourg
BP 522 L-2015 Luxembourg
Tel.: (+352) 27 855
Fax: (+352) 27 855 855
Main contact: Marcus PETER
mpeter@bonnschmitt.net
www.bonnschmitt.net
IFLR Europe Awards 2013: Luxembourg Law Firm of the Year 2013 . Restructuring Deal of the Year Award 2013

5. #3 – capitalV – 5
Dear Private
Equity
professionals,
We are proud to present the
third edition of Luxembourg
Private Equity & Venture
Capital Association’s (“LPEA”)
proprietary publication, “CapitalV”. Similarly to
our previous magazines, this one aims to
provide you with a comprehensive
understanding of the Luxembourg private
equity and venture capital market.
We hope that the materials you find
in this publication are helpful to you
in getting to know Luxembourg,
and considering it as a viable
alternative jurisdiction for your
future AIF developments.
This magazine will also give you
insights on life in Luxembourg and
markets trends. LPEA stands ready
to welcome, guide and support you.
Kindest regards
Paul Junck, Managing Director
Hans-Jürgen Schmitz, Chairman
Luxembourg Private Equity
& Venture Capital Association
Editorial
©©360Crossmedia/L.D

6. CSSF interview
AIFMD:
transitioning
to the new law
Interview with Jean-Marc Goy, Counsel for International
Affairs – CSSF, Luxembourg regulatory authority.
6 – capitalV – #3
Watch
the
interview
requirements of the AIFMD. The CSSF has already author-ised
3 AIFMs established in Luxembourg.*
Checklist: as an AIF what shall I do and when?
The AIFMD provides for transitional provisions, which will
expire on 22 July 2014. In order to avoid unnecessary pres-sure
and tight timelines, as an AIF, it would seem highly
advisable to be in full compliance with the requirements of
the AIFMD as soon as possible.
Adaptation of CSSF to the latest development
The active involvement of the CSSF in the work that ESMA
is carrying out in the context of the AIFMD is demanding in
terms of time and resources. The CSSF is currently still hiring
staff, notably on account of the additional responsibilities,
missions and functions which it will have to perform in the near
future. To accommodate all our staff in one office building, we
are currently in the construction phase of our new premises
which will have a capacity for more than 600 people.
What are the key differentiation factors
for Luxembourg?
Our investment fund industry always likes to point out the
experience and know how accumulated, particularly in the
field of cross border distribution of its products and the
leading role that Luxembourg is playing in that field.
*11 AIFMs as of January 2014. The interview was recorded in November 2013.
Where does the Luxembourg market stand
in terms of transitioning to the new law
(alternative investment funds managers
directive - AIFMD)?
Luxembourg was among the countries which have imple-mented
the AIFMD within the timeframe given in the direc-tive.
This was done by the adoption of the law of 12 July
2013 on AIFMs. It is worth noting that, as of today, a num-ber
of EU Member States have still not implemented the
AIFMD. In addition to the directive, a considerable number
of texts have been adopted at the level of the EU institu-tions
with the involvement of the European Securities and
Markets Authority (ESMA), like in particular the level 2
Commission texts based on ESMA advice, the ESMA guide-lines
on key concepts, the ESMA guidelines on sound remu-neration,
the ESMA guidelines on reporting obligations,
ESMA’s opinion on the collection of information for the
effective monitoring of systemic risk, ESMA’s opinion and
final report on the draft regulatory technical standards on
types of AIFMs, ESMA’s opinion on practical arrangements
for the late transposition of the AIFMD, ESMA’s work in rela-tion
to the Memorandum of Understanding (MoU) concern-ing
consultation, cooperation and the exchange of
information etc. The CSSF is very actively involved in the
work that ESMA is carrying out in the context of the AIFMD.
The entities of the Luxembourg investment fund sector are
now in the process of adapting and adjusting their struc-tures
and operations to be in full compliance with the

7. Jean-Marc Goy,
Counsel for International
Affairs – CSSF.
#3 – capitalV – 7
© 360Crossmedia/C.O.
“It is worth
noting that, as of
today, a number
of EU Member
States have still
not implemented
the AIFMD.”
Jean-Marc Goy

8. AIFMD
Luxembourg
as the next
trade mark for
Alternative
Investment
Funds
Alexandre Prost-Gargoz, LPEA member*
8 – capitalV – #3
and shortens the time to market while preventing the bur-den
(and costs) of an analysis of the private placement rules
in each country where they have a potential investor. In this
perspective, Luxembourg has a key role to play thanks to its
unofficial but effective role as hub for cross border distribu-tion
of UCITS, even beyond the European borders. As such,
Luxembourg is more than well placed to allow Private Equity
houses and other alternative players to ensure a safe and
efficient marketing route.
Recognition
Luxembourg is well known in the financial industry mainly
thanks to its global UCITS market share. In fact, Luxembourg
has the largest market share in terms of net assets in the
European fund industry. Among the asset management
players located in Luxembourg, there are a significant num-ber
of well-established Private Equity houses, which used
to opt for non-regulated structures. Since 2008, the appe-tite
from institutional investors to get exposure to alterna-tive
investment via onshore vehicles has significantly grown
and hence the success of Luxembourg funds such as
Specialised Investment Fund (SIF) and Risk Capital
Investment Company (SICAR) has boosted the Luxembourg
alternative fund industry.
New Toolbox
Luxembourg has now adopted the limited partnership
regime which sticks to the best international market prac-tice
in terms of flexibility, tailored terms and transparency
to investors. Coupled with an AIFM in Luxembourg, Private
Equity houses can raise funds in Luxembourg similar to off
shore LPs in the blink of an eye.
A level playing field cross-border
distribution
Thanks to AIFMD today EU domiciled funds with EU man-ager
can benefit from the passport for distribution, not only
to qualified investors across the 31 EEA markets, but also,
where countries allow for, to retail investors. This passport
significantly eases the fund raising for Private Equity houses

9. “The passport
significantly
eases the fund
raising for Private
Equity houses.”
Alexandre Prost-Gargoz
#3 – capitalV – 9
© Shutterstock/jorisvo
Know-how and substance
Furthermore all service providers alongside the value chain
of Private Equity asset class are already present in
Luxembourg with sound systems and qualified people. In
this respect, back in 2009 already, offshore (Cayman,
Channel Islands, etc.) specialised boutiques have been set-tling
operations in Luxembourg, not only to follow some cli-ent
wishes but also as an anticipation of the growing demand
of Luxembourg products.
In conclusion, while AIFMD is still often considered as
an additional regulatory burden with no advantage for asset
managers, Luxembourg, with its infrastructure, people and
know-how can help Private Equity houses raising funds more
easily, managing running costs more efficiently and building
up an on shore platform for their back and middle office.
*Alexandre Prost-Gargoz,
Partner - Deloitte Luxembourg

10. Interview
Capitalising on
the Luxembourg
brand
Guillermo Morales, executive chairman
of GGM Capital, says Luxembourg is an ideal
base not only for the firm’s venture capital
fund and its management but for portfolio
companies, too.
10 – capitalV – #3
next five years in becoming the global leader in the sector.
Why did you set up your GP in Luxembourg?
The fund’s management team is in Luxembourg, where I
have been resident since 2008. We looked at different juris-dictions
but soon realised that no other country could com-pete
in offering an environment that benefited the fund, our
investors and portfolio companies so positively.
We certainly encourage our portfolio companies to consider
establishing their headquarters and operations in
Luxembourg and to benefit from its IP regime.
What is your background?
I founded my first company when I was 17 and have spent
my career so far investing in start-ups particularly in the
security space, such as biometrics and electronic signa-tures.
I first looked to raise money from government to fund
R&D projects, but later decided to create a vehicle to invest
in these projects at a higher level.
As far as I know, I was the youngest person to establish a
fully-regulated venture capital fund in Europe, at the age of
27 (I’m now 28). There’s a reason for that: it normally takes
some time to acquire the IT and venture capital experience
you need. I’m lucky I started so young and have built a solid
team around me for many years.
What are GGM Capital’s activities?
We are a boutique investment bank, headquartered in
Luxembourg with offices in Spain and London. Our three
main divisions are investment management through, a
SICAR vehicle; corporate finance, with transactions mainly
in European IT; and capital markets, enhancing liquidity to
Nasdaq-listed companies.
Our first venture capital fund is the GGM High Growth IT
Fund. We will launch two further funds in 2014, one focusing
on IT venture capital in Latin America and the other invest-ing
in the hospitality sector.
What kind of investments do you make?
The investment focus of GGM High Growth IT Fund is on
early-stage companies that have the potential to be disrup-tive
and game changers but that already show traction in
the market.
A prime example is Optimitive, a highly disruptive technology
company that saves its customers up to 20% on industrial
energy bills. They have over three years of R&D, employee
15 people across Luxembourg, Spain and Germany
and already generating revenues. The company received
€1.4m from us to support further sales and marketing
developments. We are also assisting Optimitive with struc-turing,
financing and growth, and will support them for the

11. #3 – capitalV – 11
“Multiply your
objectives by
thousand with
passion.”
Guillermo Morales
© 360Crossmedia/C.O.

12. Cover Story
Mangrove Capital Partners
After Skype,
Wix!
Everyone remembers the Skype success story that
made Mangrove Capital Partners famous. Following
the listing of Wix on the NASDAQ in November 2013,
the Luxembourg-based Venture Capital company has
achieved another master stroke.
12 – capitalV – #3

13. #3 – capitalV – 13
© WIX
WIX Key figures
Users: 40 million
Employees: 576
Turnover: +/- $55 million as
of 30 September 2013.
(first 9 months of 2013)
Value: Over $800 million.

14. Cover Story
14 – capitalV – #3
© 360Crossmedia
INTERVIEW
Hans-Jürgen Schmitz
Hans-Jürgen Schmitz, Mangrove Capital Partners’ co-founder
and managing partner, answers our questions.
How did the Wix story
start for Mangrove?
In 2007, we began to explore
the Israeli market. As a result
of this investigation, we were
approached by a seed
financer who told us about
Wix and asked for our opinion.
Mangrove immediately
purchased 3% of the
company, before going on, 9
months later, to launch a
financing round of 3 million
dollars to help the start-up
company move up to the next
gear. This is completely in line
with our philosophy, which is
based on “getting a feel for”
the company we are investing
in, while aiming to acquire
between 20 and 30% of the
capital. At the time, the team
in Tel Aviv had barely twenty
members and the product
was still in the test phase.
However, the company’s
three managers convinced us
from the very start: these
hard-working pioneers
focused on innovating and on
the precise statistic of the
number of new customers
acquired. They also had a
broad vision of a platform
offering unrivalled ease of use
and encompassing different
aspects of website
management: creation,
hosting, ranking,
e-commerce, etc.
What were the key
milestones in this
project up until the
listing on the NASDAQ?
There were two main
question marks. First, back in
2011, we received a bid of
400 million dollars for Wix.
We were tempted to take this
“exit” on behalf of our
investors, but we believed in
the company’s potential and
turned the offer down. Time
has now proved us right.
Following an investment of
10 million $, our share is now
valued at $200 million.
Secondly, in the beginning
Wix used flash to display its
customers’ websites. In
2012, prompted by the
success of the iPhone and
iPad, the company’s
managers decided to recode
everything in HTML 5, a
language compatible with all
terminals: computers, iPhone,
tablets, etc. This could have
caused delays, a slowdown in
commercial development or
the appearance of new
competitors, but none of
these things actually
happened. Quite the reverse,
the arrival of HTML 5 at Wix
accelerated the arrival of new
customers.
After recording
sales of more than 50
million dollars over
the first 9 months of
2013, why is WIx not
yet profitable?
A break-even point was
reached in some quarters,
but this isn’t the main focus.
We must bear in mind the
many competitors, such as
GoDaddy, operating around
the world. It was the same
with Skype: they were not the
only people developing Voice
over IP in the early days. For a
long time, the priority for Wix
was growth and winning
market share. Today, the
ability to precisely anticipate
the costs of acquiring new
customers is allowing Wix’s
managers to increase their
marketing expenditure in a
controlled manner to save
time. In particular, as
customers stay for an
average of several years. If
the CEO Avishai Abrahami
wanted to return to a break-even
situation, he could
achieve this very quickly, but
this would have
consequences in terms of
future growth! Financial
analysts estimate that the
funds raised on the stock
market will enable Wix to
double its turnover within the
next 18 months.
“Wix represents the
largest IPO ever for
an Israeli company in
the Internet sector”
Hans-Jürgen Schmitz

15. #3 – capitalV – 15
© WIX
INTERVIEW
Avishai Abrahami
Avishai Abrahami, co-founder and CEO of newly-listed
website developer Wix, says the willingness
of Mangrove Partners to keep faith amid the depths
of the 2008 financial crisis was critical to the
company’s survival and success.
Can you sum up the
Wix success story in
a few words?
It all started in 2006
because we had a problem:
we wanted to create a
website, but couldn’t find a
tool that would let us build
one in an intuitive way. So
we decided to create a tool
that would allow people to
build websites themselves.
We developed the code and
unveiled Wix to the public
with a beta version,
enabling us to measure
what users did and to
develop the functionalities
they wanted. Mangrove
invested in 2007, we
launched commercially in
2008, and revenues
started to come in. Today
we have 42 million users.
Which were the
biggest challenges
you’ve had to
overcome?
The biggest was to move
from Adobe Flash to
HTML5 – we had to code
everything from scratch.
Obtaining financing was
also difficult after the 2008
financial crash and the
Madoff affair, when
basically Mangrove saved
us. Finally, scaling is very
challenging. At the
incredible speed the
company grew, it’s difficult
to maintain a strong
structure.
Nevertheless, most of it
was fun, more than with
other companies.
Everything worked well with
the team, investors, and
client acquisition. And our
competitors did us a big
favour by failing to offer
competitive products!
How would you
describe your
relationship with
Mangrove?
They are great friends and
we love working with them.
Marc [Tluszcz] will always
push you, challenge you,
bring in experts. It is a
unique relationship and one
we really enjoy. They are not
like any other investor: they
are closely involved, and
friends at the same time. In
2008, when no-one else
wanted to invest in us, they
said: “We like what you do –
keep going.”
What’s next for Wix?
Building the website is just
a start. Wix aims to become
a one-stop business
solution where people can
find marketing, inventory,
sales and content. We
recently launched an App
Market allowing developers
to offer new features for
our clients’ websites. It’s a
huge market.
“It’s
always
about
people,
isn’t it?”
Avishai Abrahami
Wix offices
and staff
New York: 4
San Francisco: 70
Ukraine: 35
Tel Aviv: 460
Lithuania: 7

16. Regulatory
Is the Luxembourg
Special Limited Partnership
really so special?
16 – capitalV – #3
©DR
The introduction of the “Special Limited Partnership” (SLP) into Luxembourg
company law, as part of the transposition of the AIFM directive is no
coincidence. Private equity practitioners have been lobbying for this new
vehicle enabling to more effectively compete with “offshore” jurisdictions like
the Channel Islands, historically jurisdictions of choice for private equity fund
domiciliation. But will the SLP help fill the gap? There are certainly strong
technical arguments in favour.
A few differences which make no difference
Although largely aligned with the most sophisticated limited par-tnership
regulations elsewhere in the world there are a few dif-ferences.
One relates to the nationality of the SLP. Where an
English, Jersey or Guernsey limited partnership has the natio-nality
of its place of registered office, a Luxembourg SLP would
need to be effectively managed out of Luxembourg to retain its
nationality and benefits. Public filing requirements also vary from
one jurisdiction to another, England and Scotland for instance
imposing more disclosure. Funding, equity contributions, distri-bution
and claw-back mechanisms are more investor friendly in
an SLP than in most of the foreign partnerships. However all
these differences (mostly details in practice) will be only margi-nally
important in the choice of a jurisdiction.
Now with essentially the same limited partnership regulations
as other jurisdictions in addition to the existing fund vehicles and
together with a longstanding experience of domiciling acquisi-tion
and holding vehicles, Luxembourg has the tools to convince
PE fund sponsors to consider Luxembourg as a jurisdiction of
choice for their next generation of funds.
*François Pfister, Partner, OGIER
Benchmarking offshore jurisdictions
Around 50 SLPs have been created, but just a handful in the
PE space and none of them yet regulated by the CSSF. Not a
quick starter, but that is not a surprise. PE players are seeking
certainty and long term stability and will not test the water so
quickly. Setting up a PE fund as an SLP may be considered as
a bold move by some, although it is a logical one. Indeed the
SLP legislation has taken on board the «best in class» elements
of foreign limited partnership regulations in particular from
Jersey and Guernsey. Main features include: contractual free-dom
and ease of creation, flexible capital contributions and
funding structure, confidentiality, tax transparency, clear
governance and in particular «non management» safe harbour
rules for active limited partners safeguarding limited liability of
the LPs.
A wide contractual freedom
Investors and managers are seeking a modern legislative fra-mework
tailored to their needs, an enabling not prescriptive envi-ronment
and a limited partnership agreement which they are
familiar with. Contractual freedom is thus paramount. There are
very few statutory prescriptions and these are easy to comply
with. In practice GPs and LPs may use existing limited partner-ship
agreements and transplant them into a Luxembourg envi-ronment
with few deviations from their present forms. Being able
to establish the fund vehicle with its acquisition and holding
SPVs (typically in Luxembourg) in the same jurisdiction is a com-pelling
proposition for both tax and regulatory substance and
operational efficiencies, particularly in a more harmonised envi-ronment
for fund managers post AIFMD implementation.
“Private Equity
players are seeking
certainty and long
term stability.”
françois pfister
François Pfister, LPEA member*

17. #3 – capitalV – 17
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18. 18 – capitalV – #3
Atoz, leading tax advice in Luxembourg. www.atoz.lu

19. Regulatory
Pierre Weimerskirch, LPEA Member*
#3 – capitalV – 19
Time is
now
ence as well as services that can be delegated: an AIFM
cannot outsource substantially more tasks and functions
than it is itself carrying out. Having robust systems and
organizational control frameworks in place as well as quali-fied
and experienced staff is absolutely critical to
success.
SKILLED RESOURCES
Another key item under AIFMD is having adequately skilled
resources to respond to the new requirements. New recruits
and existing staff need to understand the AIFM mindset
while at the same time being familiar with the requirements
for regulated funds like UCITS since AIFMD has “borrowed”
from the UCITS regulatory framework.
To assist the AIFM in meeting the challenging regulatory
environment, service providers in Luxembourg have come
up with different solutions for managers of alternative funds
facing the AIFMD requirements. Small and medium-sized
managers are more likely to benefit most from specialized
outsourcing solutions.
*Pierre Weimerskirch, Managing Partner,
Luxembourg Investment Solutions S.A.
Since 18 June 2013 the Luxembourg regulator,
the CSSF, admits applications for authoriza-tion
as Alternative Investment Fund Manager
(“AIFM”). Time is particularly critical for those
managers that have taken advantage from the
transitional period but need to communicate their plans to
the CSSF by 1 April 2014 as to how they intend to adapt
their organizations to comply with the AIFMD rules by 22
July 2014.
In order to receive authorization as an AIFMD-compliant
manager on time, they will have to move ahead swiftly with
their applications. To assist the applicant AIFM in its filing
process, the CSSF published their FaQ already in July 2013
and it has an application template form available on its web-site
(www.cssf.lu).
This application form foresees that the manager provides
inter alia information on the applicant AIFM, the governing
body and senior management, the ownership structure, the
program of activities, the capital and financing structure
and the internal organisation. However, prior to submitting
the application file, the manager has to address a series of
practical challenges upfront.
COMPLIANCE EXPERTISE
AIFMD introduced more compliance requirements. Many
smaller and medium-sized managers so far had no or very
limited exposure to regulatory authorities – a challenge for
their day-to-day operations. They have to respond to a long
list of new requirements: documented independent valua-tion
policies, fund risk profiles, fund stress tests and fund
liquidity management processes, etc. AIFMD substantially
impacts how alternative investment managers operate.
SUBSTANCE REQUIREMENTS
The AIFM also establishes substance requirements in
terms of number of professionals, their profiles and experi-
“The substance
requirements will be
a challenge for
smaller AIFMs fROm
a profitability point
of view.”
Pierre Weimerskirch
© 360Crossmedia/Y.M.

20. Setting up in
Luxembourg
20 – capitalV – #3
© DR
Domiciliation
Setting up a Private Equity Fund in
Luxembourg is a simple four step
process.
approval, to manage a Luxembourg fund that is a simple
investment vehicle, either regulated o r not. Otherwise, a
management company regulated in Luxembourg or the
manager’s country of origin must be set up.
2. Point number two on the checklist – choose the legal
form for the investment vehicle. Luxembourg has a wide
spectrum of vehicles, ranging from corporate type struc-tures
through to partnerships inspired by the UK/US model.
3. The next step is selecting suppliers of central administra-tion,
deposit, audit, legal advice, risk management and eval-uation
services. This phase includes drawing up the
prospectus with lawyers and negotiating terms and condi-tions
with investors.
4. The final step is submitting the application to the CSSF.
Following this, the response time varies from 1 to 3 months.
As soon as approval is received, the fund can be set up and
transactions launched!
Wrap up
Luxembourg offers many advantages: a reactive regulator
and a well-established Private Equity ecosystem capable of
supporting fund managers. For LPs, Luxembourg offers
efficient fiscal structures. Last but not least, it gives fund
managers access to flexible solutions to transfer all or part
of their team in order to benefit from the carried interest tax
regime of up to 10% under certain conditions.
*Arnaud Bon, Head of Capital Markets & Funds, SGG S.A.
*Luca Gallinelli, Industry Leader Private Equity
Clients, SGG S.A.
A head start
The first three jurisdictions to grant licences for the man-agement
companies under the AIFM Directive (AIFMD) are
the Grand-Duchy of Luxembourg, France and Ireland.
Luxembourg’s regulator has once again demonstrated its
responsiveness and readiness to adapt. The AIFMD is not
a major revolution in Luxembourg as, even before the intro-duction
of the AIFMD, the country had decided to make
protection of investors its priority. Despite the new obliga-tions
imposed by the EU text, ultimately the environment
remains very close to what it was before under the SICAR
(2004) and SIF (2007) regulations. Back in 2012, new obli-gations
governing service delegation and risk management
were introduced under Luxembourg law.
Checklist
A four-stage process must be applied to establish a Private
Equity operation in Luxembourg.
1. First, you need to ask yourself three fundamental ques-tions:
what are (i) the fund distribution policy, (ii) the manage-ment
environment and (iii) the fund raising aims for this
project.
A full AIFMD licence is required to receive the pan-European
distribution passport, regardless of the amount of assets
managed. Without this licence, distribution is restricted to
the private placement regime of each of the countries in
which the fund is marketed. We then come to the question
of the organisational model: will the Luxembourg fund be
managed from abroad, by an AIFM management company,
or from Luxembourg? It is possible for a management com-pany
governed under European regulations, and with AIFM
Arnaud Bon,
LPEA Member*
Luca Gallinelli,
LPEA Member*
© DR

21. www.ehp.lu
Quality Experience Innovation
From investment structuring to exit strategies
PE Fund Set-up
Structuring & Strategy
Merger & Acquisition
Financing
Asset Management
Management Participation
Tax optimisation
AIFMD compliance
Luxembourg Office
2, Place Winston Churchill / BP 425
L-2014 Luxembourg
Tel: +352 44 66 440 / Fax: +352 44 22 55
Hong Kong Office
Suite 503 / 5/F ICBC Tower / Citibank Plaza
3 Garden Road / Central / Hong Kong
Tel: +852 2287 1900 / Fax: +852 2287 1988
Your direct contact for
Non-Regulated Products:
Toinon Hoss
Partner
Tel: +352 44 66 44 2235
toinonhoss@ehp.lu
Your direct contact for
Regulated Products:
Sophie Laguesse
Partner
Tel: +352 44 66 44 5464
sophielaguesse@ehp.lu

22. Trends
The wisdom of
crowdfunding?
Crowdfunding aims to solve the classic problem confronting many
start ups: lots of brilliant ideas but insufficient capital. It is a very
fashionable concept, but is reality matching the hype?
22 – capitalV – #3
allowing a concept whereby investors never meet the pro-ject
promoters. In the US (where the idea began) a range of
funding limits and filing requirements were imposed in
2012. These appear to negate the advantages of this form
of accessible, flexible funding. The Italian government has
taken a different view, with their regulatory regime intro-duced
in July 2013 being significantly more liberal. The land
that gave us the phrase “caveat emptor” (buyer beware)
appears more keen to unlock funds to help their struggling
economy. Few other countries have legislated so far.
Ambitions for Luxembourg?
In Luxembourg, only one company and one cultural project
have sought crowdfunding so far. During the recent election
campaign, the minister responsible for small businesses
Françoise Hetto-Gaasch promised action to help local
entrepreneurs. Alternatively, maybe Luxembourg could
become a platform for European and global crowdfunding.
Private sector energy would have to drive this, working with
a conducive regulatory regime.
How it works
In an attempt to harness the “wisdom of the crowd”, fund-raising
web platforms have emerged. Entrepreneurs, social
activists and cultural promoters post enticing descriptions
of their plans inviting many individual investments of hun-dreds
or thousands of euros. Potential backers can view a
history of how support has been granted and comments from
others. Whether through loans or equity, small investors can
thus become venture capitalists, taking a big risk in the hope
of big returns. Generally these projects are too small or unu-sual
to interest the established private equity industry.
Does it work?
Although crowdfunding is a great idea and makes for inter-esting
press articles, some analysts suggest results are
lacking. Funding remains elusive. Investors are wary, requir-ing
substantial marketing efforts to bolster the on-line
descriptions. As well as these costs, the platform provider
receives 5-10% commission of all funds raised. Then there
is the regulation set by law makers with concerns about
© Shutterstock/Olivier Le Moal

23. w w w. h a l s e y - g r o u p . c o m
Established in Luxembourg since 1995, we provide a full range of
services to major private equity firms, leading institutional and corporate
clients and individual entrepreneurs.
net
z6creation.In particular, we undertake the following:
Fund admInIstratIon sErvIcEs
• central administration
• registrar and transfer agency
• ongoing monitoring and compliance support
company managEmEnt
company FormatIon
domIcILIatIon
accountIng and admInIstratIon
tax compLIancE
assIstancE In sEttIng-up own oFFIcEs
For further information, please visit our website or email us
www.haLsEy-group.com
174, route de Longwy L-1940 Luxembourg
t. +352 22 60 22 | F. +352 22 42 52 | info@halsey-group.com

24. Life in Luxembourg
LIVING in
Luxembourg
It is only when house price bubbles burst that we can be really
sure they existed. Housing costs in Luxembourg appear to be high,
with the average house around the capital selling for €865,000.
But are these valuations about to crash?
How to spot a bubble?
To estimate if housing supply and demand are out of sync,
economists compare home prices with average rent and
household income. The most recent data we have is from
2011, calculated by the national statistics office Statec and
the Luxembourg Central Bank. The price/income ratio was
20% above its long term average and with the price/rent
measure 30% higher. These figures were then approaching
the peaks seen in 2007, after which prices fell. Since 2011
24 – capitalV – #3
home prices have increased further (around 7%) with income
unlikely to have kept pace.
Supply and demand in Luxembourg
So although we should be concerned, the Central Bank poin-ted
to several apparently sustainable causes for this in its
recent annual Financial Stability Review. They point out that
supply and demand are impacted by strong population
growth, a relatively limited supply of new homes, the overall

25. #3 – capitalV – 25
improvement in the quality of the housing stock and tax
breaks for home loans. Planning law has resisted major
reform for decades; so many communes will continue to veto
the creation of new building plots. As well, the price to income
and rent ratios are much lower than in many other European
countries.
Risk factors
The picture looks relatively benign; but the Central Bank also
highlighted risks. Since 2008, the value of mortgage loans
granted has risen strongly and repayment schedules have
increased. Most home loans have variable interest rates. So
while repayments may be affordable now with current histo-rically
low base rates, increases could push some households
to the brink, especially if jobs are lost. This would put downward
pressure on prices and the willingness of banks to lend. That
said, although Luxembourg has higher than European average
debt, saving and other investments are also unusually high.
Economy is key
Perhaps the greatest risk is simply the outlook for the eco-nomy.
State spending is currently unsustainable and correc-ting
this will cut demand in the economy. The Eurozone is
recovering to the benefit of the country’s export-oriented
firms, but this improvement is fragile. So far the financial sec-tor
has been slowed but is still doing fine, despite the mass
of new regulation. This too could change. Immigration will
slow down and unemployment will rise if jobs are not created.
Home prices would be affected. The outlook seems okay, but
the buyer should still beware.
© Ministère du tourisme Luxembourg

26. Life in Luxembourg
University:
10 years of
new thinking
Founded ten years ago, it hasn’t taken the University
long to become a respected national treasure.
As a research-based, internationally-focused
institution, it has shrugged-off initial concerns
that it would be inward-looking.
which is from national public funds. As well, the Cité des
Sciences will eventually cost €600m. So what is the pay back?
There were 1,161 scientific publications last year, five patents
have been registered, a further 21 are pending and there have
been a handful of business spin-offs. Established firms (such
as Deutsche Bank, ArcelorMittal, UBS, SES, BCEE, IEE, HiTec,
Post, Eurobeton and Delphi) are also offering funding and prac-tical
assistance for research. They benefit from the new ideas,
the University helps attract train and retain skilled staff and it
boosts their corporate social responsibility profiles.
Ideas and reputation
The symbolism is clear. The University will be hosted in the
shiny new “Cité des Sciences” being constructed in the shadow
of a rusting blast furnace on the Belval brownfield site. So,
where hot steel once made the country wealthy, cool ideas will
help the country innovate and thrive. This is a boost for
Luxembourg international reputation. The facility will host a
business start-up zone and the country’s independent public
research centres. The move will start in 2014, with only part of
the Law, Economics and Finance faculty staying in the capital.
International research focus
There is a clear focus on fundamental and applied research,
with almost three times as many master’s and PhD pro-grammes
(29) as bachelor’s degrees. Five research priorities
match the country’s existing expertise: international finance,
secure, reliable and trustworthy information technology, sys-tems
biomedicine, European and business law and education
and learning in multilingual and multicultural contexts. Bio-tech
is something of a new departure for the country, but the
University is forging a unique role. Whereas researchers in
larger countries often feel bound to work with national experts,
the University can seek the most appropriate partnerships
from anywhere in the world. It is currently working with around
60 universities globally. This is helped by around half the 6,000
students being non-Luxembourgers, coming from around 100
countries. As well, the 600 teaching staff originates from more
than 50 countries.
Cost and benefit
The government’s commitment is clear, with state spending
increasing through the crisis. The University received €150m
this year, along with €27m from research tenders, much of
26 – capitalV – #3
«Where hot steel
once made the
country wealthy,
cool ideas will help
the country
innovate and thrive»
© David Laurent

27. • Management Company (AIF & UCITS)
• AIFM Solutions
• Risk Management
• Compliance
• Management Services
Luxembourg Investment Solutions S.A.
Airport Center Luxembourg 5, rue Heienhaff L-1736 Senningerberg · T: +352 26 34 56-1 · F: +352 26 34 56-66
info@investment-solutions.lu · www.investment-solutions.lu

28. BusinessWomen
Betty Fontaine:
Brewer from father
to daughter
As head of the Brasserie Simon since 2003,
Betty Fontaine is developing her business
in a delicious niche market: specialty beers.
28 – capitalV – #3
vation, and then she moved from theory to practice. At the
time, the brewery only had one brand and a production of
18,000 hectolitres. In 2006, the Brasserie Simon bought
Ourdaller microbrewery, based in Heinerscheid, which pro-duced
a special beer from buckwheat. The following year, the
Okult brewery was taken over: an organic beer flavoured with
coriander and orange peel.
The Malt War
The results of this strategy bore fruit in 2009. This meant
that the company could invest in the modernisation of its
production tool and innovate: for example, Okult launched a
‘stout’ similar to the famous Guinness and the Simon Pils
was marketed in a beautiful aluminium bottle, 100% recy-clable.
This niche strategy allowed Betty to strengthen her
position on the Luxembourg market while avoiding confron-tation
with the two giants on the market, Bofferding-Battin
and Mousel-Diekirch, which boast incomparable production
volumes and marketing budgets. «You can’t go and pee with
the big dogs if you can’t lift your leg as high as them» she
likes to joke. Future growth may be driven by exports, but in
the meantime the lorries of the Brasserie Simon criss cross
the country with their deliveries, even calling in on private
customers.
A break with tradition
The Brewery was created in 1824 by Charles Mathieu,
whose wife was a member of the Simon family. It was sold
15 years later and returned to the hands of the family in
1890 when it was bought at auction by Jules Simon, Betty’s
great-great-grandfather. Jules’ son, Joseph, was to take
over the business, followed by his daughter, Jacqueline,
Deputy Mayor of Wiltz, who married Charles Fontaine. Their
son, Jacques took over the reins in turn in 1975. Betty’s
arrival in the brewery in 2003 marked a break with tradition:
she is the first person in the family since 1890 to join the
brewery without a first name that starts with a ‘J’!
The ‘Betty’ touch
She was not destined to take over the brewery and, indeed,
the subject was taboo at home. Her mother thought she
would become a housewife. Finally, her big brother chose to
go into computing and Betty completed a course in electro-mechanical
engineering. She had intended to specialise in
aeronautics, but graduated in mechanical engineering, which
had a less theoretical bent. She still regards the 27th of June
2003, the last day of her studies, as a milestone even though
she went back to study for an MBA at night school later on.
Her mission began at the brewery with a first year of obser-

29. © 360Crossmedia
#3 – capitalV – 29

30. Event Calendar
EVENT
CALENDAR
WHAT WHEN WHERE
LPEA/SECA Breakfast
LPEA Board Meeting
LPEA New Year’s Event
EVCA Responsible Investment
Summit
Polish & CEE Private Equity
Conference
German Private Equity Summit
SuperReturn International 2014
LPEA London Roadshow
EVCA Investor’s Forum
ALFI Spring Conference
EVCA CFO-COO Summit
EVCA Symposium
January 15, 2014
January 28, 2014
January 28, 2014
January 28, 2014
January 31, 2014
February 24, 2014
February 25-27, 2014
March 11, 2014
March 12-13, 2014
March 18-19, 2014
May 13-14, 2014
June 11-13, 2014
Au Premier, Zurich
Luxembourg
Luxembourg
Stanhope Hotel, Brussels
InterContinental Hotel, Warsaw
InterContinental Hotel, Berlin
InterContinental Hotel, Berlin
Natural History Museum, London
InterContinental Hotel, Geneva
Nouveau Centre de conférences,
Kirchberg (NCCK), Luxembourg
London
Vienna
© DR
30 – capitalV – #3

31. LPEA in Brief
ABOUT LPEA
T
he Luxembourg Private Equity and Venture Capital Association (LPEA)
is a member-based, non-profit trade association established in 2010.
LPEA represents, promotes and protects the interests of the Luxembourg
private equity and venture capital industry.
LPEA’s role includes representing the interests of the industry to regulators and
standard setters; developing professional standards; providing industry research;
professional development and forums, facilitating interaction between its members
and key industry participants including institutional investors, entrepreneurs,
policymakers and academics.
LPEA’s activities cover the whole range of private equity, from venture capital (seed,
start-up and development capital), to buyouts and buyins.
LPEA is a member of the European Private Equity and Venture Capital Association
(EVCA).
EXECUTIVE COMMITTEE
Hans-
Jürgen
Schmitz
Chairman
Alain
Kinsch
Vice-
Chairman
Antoine
Clauzel
Member
TECHNICAL COMMITTEE LEADERS
Legal Committee: Séverine Michel, Xavier Le Sourne
Tax Committee: Marianne Spanos, Patrick Mischo
AIMFD Committee: Hans-Jürgen Schmitz, Paul Junck
Accounting & Valuation Committee: Benoît Cheron, Yves Courtois
Market Intelligence & Training Committee: Axelle Ferey, Maarten Verjans
Promotion Committee: Bertrand Manhe, Benjamin Lam
Patrick
Mischo
Member
Emanuela
Brero
Vice-
Chairman
Paul Junck
Managing
Director
Gilles
Dusemon
Member
Jérôme
Wittamer
Member
#3 – capitalV – 31

32. A law firm with global reach & local depth,
serving you in Luxembourg
Allen & Overy is a truly global law practice. Our people work in 43 offices
across 30 countries. It’s an international network that helps the world’s
most successful businesses implement their strategies on a global stage.
The fact that our lawyers are based on the ground in every region means
that we can combine our global reach with in-depth local knowledge.
From our Luxembourg office, this means giving our clients intelligent
advice in banking, capital markets, competition, corporate, intellectual
property, insurance law, investment and pension funds, private equity,
labour law, litigation, real estate and tax.
In short, we’re an international full service practice of local experts.
Allen & Overy means Allen & Overy LLP and/or its affiliated undertakings.
© Allen & Overy 2013 allenovery.com
CS1310_CDD-37502_ADD-41817
For further information, please contact
Allen & Overy in Luxembourg,
Tel +352 44 44 55 1
infoluxembourg@allenovery.com