Venture Capital Funds, Real Estate Investment Funds & SICAFI`s

INVESTMENT VEHICLES

Venture Capital Funds, Real Estate Investment Funds & SICAFI`s

RSA - RAPOSO SUBTIL E ASSOCIADOS - SOCIEDADE DE ADVOGADOS,SP, RL

Venture Capital Funds


Venture Capital FundsMain Characteristics

Legal Nature

• VCF´s are autonomous pools of assets

• No legal personality

• Capacity to institute legal proceedings

• Belong to the Participation Unit Holders (UP* owners)

Tipology of investments

• Equity (shares, preferred shares and other securities)

• Bonds and Loans

Tax Regime

• Exemption of corporate tax (IRC)

• Exit Tax

• Income subject to 10% withholding tax for fiscal residents and 0% for non residents in Portugal, subject to the Residency Tax applicable

Responsabilities

• VCF´s are not liable for any debt or lien from Unit holders, the management company, depositary bank, other entities involved in the sale of UP’s or other VCF´s.

Assets

• VCF’s are close end funds

• Minimum capital: €1.000.000.00

• Capital raise supported by new entries of cash or in kind

• Minimum subscription of €50.000,00 per investor

* Participation units, also designated as investment units, are securities without a nominal value which provide owners (unit-holders) with the right to an ideal share of the fund’s assets


Venture Capital FundsRegulatory Entities

VCF

CMVM

Supervises Law and Rules applications

Verifies the Management Regulation of Funds

Sanctioning body

Bank of Portugal

Supervisory role over the financial

entities

Auditors

Statutory accounts audit

Venture Capital FundsAutonomous Compartments

• Each compartment is represented by one or moreUP’s categories;

• The UP’s value is determined by the division of thenet asset value by the number of UP’s of eachcompartment;

• A VCF with several compartments has just one FundManagement Regulation;

• The same legal regime is applied to eachautonomous compartment , namely regarding theUP’s and the capital pre – requisites;

• The Funds Management Regulation defines theterms and conditions for UP’s transfers amongautonomous compartments.

• Each autonomous compartments has it´s own setof independent accounts

The Funds Management Rules & Regulations can accommodate several

autonomous compartments, where:

Venture Capital FundsCapital Subscription and Payment

Each UP Holder underwrites the VCF UP’s in cash or in kind (the later

is subject to an independent auditors report)

The subscription of the UP’s can be postponed as defined on the Fund

Management Regulations.

All obligations connected with the UP´s, namely VCF’s capital

subscriptions, are transmitted, in case of acquisition of the UP’s by a

third party.

DELAY:

The VCF unit holders will be considered in delay (mora) after being notified by the fund management company.

In case the UP’s are not subscribed and paid in 90 days after the notification of delay, the UP’s are lost on behalf of the VCF

Venture Capital FundsEntities Involved

VCF’s

Buy and Sell the assets on behalf of the Fund

Manages, sell and create liens on the

Funds Assets

Issues and reimburses the UP’s

Validates UP Value taking in

consideration fund assets and liabilities

Responsible for the operational management of

the Fund

Manages the relation with the Supervisors and

Tas Authorities

Responsible for the custodian of the VCF

UP’s and the securities owned by the Fund

Pays the income generated by the Fund and calculates the UP

Value

Due Dilligence

Asset Valuation

Management Company

Outsource

Providers

Make sure that the investment policy is

enforced

Unit Holders

Owner of the VCF through the ownership of the UP’s

Depositary Bank/Custodi

an Bank

Venture Capital FundsOperational Considerations

Venture Capital Fund

Unit Holder (UH)

Unit Holder (UH)

Company 1

...

Company 2Located in

any geography

Subscription and Payment of the Funds Unit

(may not be simultaneous)

Acquisition of equity stakes

Incorporation of start-ups

Finance the subsidiaries

The Fund can be owned just by one investor that can sell part or allof the units at a later stage.

The investors subscribe the VCF´s Units and inject cash in theFund.

The VCF´s receive dividends from its equity stakes and interestfrom loans granted to the subsidiary companies owned by theFund

VCF´s can invest on equity of the subsidiaries in any percentageand also on debt issued by them. It can invest also on listedsecurities up to the amount equal to 50% of the Fund’s value.

There is no restrictions on the sector or industries where thesubsidiaries are or will be operating and they can be located on anygeography.

Venture Capital FundsOperational Considerations

VCF

Unit Holders

Subsidiaries

Capital subscription and payment

Acquisition

Start - up

Finance subs

Distribution of income

On the income generated by by the Fund

On income Distribution from subsidiaries

At subsidiary level

Fiscal Residents 10%

No Fiscal Residents 0%

Withholding tax

On capital gains and other income generated by the Fund

0%

Local tax rules and rate 21% PT

Dividends received

Repayment of loans to subs

Interest from loans to subs 0%

Depends on geography

Income tax | Corporate tax

Venture Capital FundsFund`s Unit Holders Tax Regime

VCF Income DistributedRedemption of UP’s

(Capital Gains)Capital Gains from

onerous transfer of UP´s

Residents

Natural persons1

10% withholding tax rate, definitively taxed at source, with the option to aggregate the income in the income subject to the general tax rates. In the later case the withheld tax as the nature of payment on account

for the final tax due.

10% on the net income, with the option to

aggregate.

Collective persons

10% withholding tax on account for the final tax due.The income is included in the computation of the earnings before taxes.

Exception: in case there is an exemption on capital gains

Non residents, without permanent

establishmentl2

Natural persons and Collective

personsExemption of withholding tax

10% on the net income, except if included in the artº 27 of the EBF (tax

benefits statute) 2,3

1That obtain the income outside a commercial, industrial or agricultural activity

2It´s applicable the investors resident tax regime when the investors are:

• Residents in a country, territory or region with a clearly more favourable tax regime (Port. 292/2011);

• Collective persons owned in more then 25% by residents in the national territory..3

Except when the capital gains from onerous transfers of shares of companies resident in the portuguese territory and their asset base includes more than 50% ofreal estate assets based in the portuguese territory or, being management companies (SGPS) or companies that the sole purpose is to own equity stakes in othercompanies based in portuguese territory, they are in a dominant group relation, as dominant societies, with dominated portuguese resident companies with realestates assets of at least 50% of total assets located in the portuguese territory.

Venture Capital FundsBenefits

❑ Quick Licensing and beginning of operation

The registry at CMVM only implies a previous communication, so no special and express permission are required, as long as thesubscribers of the Fund are qualified investors or invest a minimum of 500.000€ per investor.

❑ Large Operational Flexibility

▪ VCF´s can invest on equity and bonds issued by it´s own companies and in any other type of securities.

▪ VCF´s can provide warranties in benefit of the it´s subsidiaries.

▪ Subscription period adjusted as defined in the investment plan (máx. of 25% of the funds term).

▪ Payment in kind or cash can be postponed over a period of time defined in the funds management rules.

▪ Possibility of issuing different types of UP´s that provide different legal and economic benefits.

▪ Possibility of having different autonomous compartments within the fund, each with it´s own UP´s.

❑ The relevance of the Funds Management Rules

▪ Define the Investment Policy and income Distribution Policy

▪ Regulates the Unit Holders Assembly and the Investment Committee.

▪ Defines the rules regarding capital increase and reductions.

▪ Defines VCF´s cost structure and values.

▪ Defines the capital subscription, realization and the regime applied in case there´s an incomplete subscription.

▪ Defines unwind/liquidation terms and conditions.


Real Estate Investment Fund

Real Estate Investment FundsIntroduction

❑ Basic definition

Real Estate Investment Funds (“REIF” or “FII” – portuguese acronym) are a common property investmentvehicle, considered as a saving instrument set under contractual form (they are not corporate entities), wherebyseveral investors invest in participation units (UP’s). This investments constitute an autonomous pool of assetthat belong to a plurality of natural and collective persons referred to as the “unit holders” or “participants”.

❑ Autonomous pool of assets

The REIF’s are autonomous undivided aggregations of assets under the joint ownership of natural, collective orinstitutional persons, and regulated by law. Participation Units or Investment Units are securities without anominal value which provide owners: unit-holders, with the right to an ideal share of the fund’s assets.

❑ Legal Personality

REIF’s have no legal personality and are represented by property or security investment fund managementcompany that act under the rules of the Civil Code. The Management Company must act in the best interest ofthe unit holders and exercise the rights and fulfill the responsibilities, on behalf of the fund.

❑ Closed End Funds Privately Subscribed

A Closed End Fund is owned exclusively by the initial unit holders. The entry of additional unit holders inpossible by the acquisition of UP´s in the secondary market or by the subscription of new UP´s under a fundcapital raise dully authorized by initial unit holders.

Real Estate Investment FundsIntervenients and Control Mechanisms

REIF

Outsourced entities

Specialized advise on:

• Asset selection taking in consideration the funds investment policy;

• Execution of Transactions.

Participant/Unit HolderOwner of the Funds Capital trough the UP´s ownership.

Fund Management Company

•Selection of real estate assets;

•Contracts closing and signing;

•Executes the distribution of income;

•Fulfilment of the information obligations;

•Controls and supervises the real estate development;

•Responsible for the Fund operational and administrative management;▪Sole responsible for the

relation with the supervisory authorities;▪Validates the UP´s Value;▪Responsible for the

relation with the Tax Authorities.

Depositary Bank•Oversight the fulfilment of

the investment policy and calculates UP’s value.

•Payment of funds income and windup proceeds;

•Custody of the securities owned by the fund

CMVM (market regulator)

- Monitors the compliance with the Law.- Monitors the preparation of the fund Management regulation;- Sanctioning Power (administrative penalties).

Bank of Portugal

- Supervises all credit institutions and financial entities like Fund Management companies.

Auditors

- Certified Audit accounts

Certified independent

appraisers registered at

CMVM:

•Obtain rigorous information

on RE assets;

-Valuations reports.

Real Estate Investment FundsMain Rules

❑ Initial Capital

▪ Not applicable on the Real Estate alternative investment vehicles when privately subscribed

or owned solely by qualified investors;

❑ Assets and Composition Rules

❑ < 5 participants/unit holders, not exclusively qualified

▪ The real estate assets can not represent less than 1/3 of the Fund total assets;▪ The real estate assets must be urban buildings or autonomous fractions;▪ Equity stakes in Real Estate Companies;▪ UP in other Real Estate Funds;▪ Derivative securities;▪ Cash.

❑ Indebtedness

▪ Qualified unit holders or <5 participants: no indebtedness restrictions▪ >=5 participants: indebtedness restriction at 33% of the fund total assets

Real Estate Investment FundsAdvantages

❑ Professional management, through the powers granted to the Investment management

company;

❑ Investment risk is limited, due to the prudential legal and regulatory rules;

❑ Capacity to operate in the market with a regulated and transparent institutional vehicle,

which adds credibility to the operation;

❑ Mandatory to provide periodic information by the Fund’s Management Company and the

Depositary Bank, ensuring a high level of transparency;

❑ Favourable Tax Regime applicable to the REIF/FII and to the unit holders.

Real Estate Investment FundsServices Provided by the Fund`s Management Company

Data Base

Coordination of the portfolio valuation

Coordination all contractual processes

Coordination and management of registries process on behalf of the Fund

Inquiry on the real estate mandatory valuations

Provide adequate information for the mandatory insurance

Bookkeeping and take the accounting of the Fund

Validates the UP values

Ensure that all Funds obligations toward the market regulators are fulfilled (CMVM)

Coordinate the payment of all tax obligations toward the Tax Authorities on behalf of the Fund


Request of all tax exemptions/reduction of levies on behalf of the Fund and in accordance with EBF - Estatuto dos Benefícios Fiscais (Tax benefit statute)

Bookkeeping of all relevant documentation relative to all real estate assets

Rent Collection

Preparation of annual reports

Coordination of the annual account certification process and auditing process by certified accounts and auditors

Payment of Fund’s income to the Unit Holders/participants


Request of all tax exemptions/reduction of levies on behalf of the Fund and in accordance with EBF - Estatuto dos Benefícios Fiscais (Tax benefit statute)

Bookkeeping of all relevant documentation relative to all real estate assets

Rent Collection

Preparation of annual reports

Coordination of the annual account certification process and auditing process by certified accounts and auditors

Payment of Fund’s income to the Unit Holders/participants

Real Estate Investment FundsFund`s Unit Holders Tax Regime

REF/FII Income DistributedRedemption of UP’s

(Capital Gains)Capital Gains from

onerous transfer of UP´s

Residents

Naturalpersons

Securities and Real Estate collective

investment vehicles

28% tax rate, income definitively taxed at source, with the option to aggregate

28% with the option to aggregate

Collective persons

withholding tax on account for the final tax due at a 25% tax rate

(Exception: in case there is an exemption on

income tax that excludes capital gains. In this situation the income will be taxed definitely at

source)

Aggregation under Corporate Income Tax (IRC)

Non residents1

Naturalpersons and

Collective persons

Securities Collective Investment vehicles

Exempt of Individual Income Tax (IRS)/ Corporate Income Tax(IRC)

Exempt of Individual Income Tax (IRS)/

Corporate Income Tax(IRC)(includes liquidation of the

vehicle)

Exempt of Individual Income Tax (IRS) /

Corporate Income Tax(IRC)(Art. 27º EBF/DTA)

Real Estate Collective Investment vehicles

210% tax rate, income definitively taxed at source

Autonomous taxation at10% tax rate

1It´s applicable the investors resident tax regime when the investors are:

• Residents in a country, territory or region with a clearly more favourable tax regime (Port. 292/2011);• Collective persons owned in more then 25% by residents in the national territory.

2Income considered is income from real estate assets

Real Estate Investment FundsTaxation of REIT

• Taxation at a 21% tax rate

• No need to make a retention at source of IRC on the income obtain by the Fund

• Losses can be carry forward for 12 year maximum

• Exemption on capital gains, other capital income and income from immovable property. All remaining income is taxed at a 21% tax rate (2015)

• Restrictions of deduction up to 70% of the taxable income

• Exempt from municipal surtax

• Payed Quarterly

• Stamp tax rate of 0,0125% for REF/FII, calculated over the net asset value of the Fund

• Taxation at 0,3% to 0,45% (depending on the municipality) calculated on the property taxable value;

• Additional tax rate (AIMI) of 0,4% calculated on the sum of the taxable value of the properties owned by the Fund.

IRC (Corporate income

Tax)

Stamp Tax

MunicipalState Tax

Real Estate Investment FundsMain Advantages

Tax Regime

Safety

Management

Valuation

Higher Tax efficiency

Legal framework that provides safety to the unit holders.

Higher effectiveness and reduced costs connected with the real estate assets

management and financing.

Credibility in the valuation process of the real estate assets.


SICAFIReal Estate

Investment Company

SICAFI – Real Estate Investment CompanyIntroduction

▪ SICAFI‘s are a collective investment vehicle with legal personality that take the form of a company through shares

with fixed capital and whose assets are held under a regime of ownership and managed on a fiduciary basis by

such companies, or independently by a contracted third party, in the sole interest of the shareholders.

The incorporation of a SICAFI requires the prior authorization of the CMVM.

▪ SICAFI’s can be self-managed, or managed by an appointed third party that must be a duly authorized investment

fund management company.

▪ The main difference between FIIs and SIIMOs is that the holders of the shares can also be in charge of managing

the fund, therefore investors will have greater control over the company’s management and investment decisions.

▪ FIIs are managed by separate fund management companies that must be registered with both the CMVM and the

Bank of Portugal, and must act independently and exclusively in the interest of the Unit-holders, at all times in

observance of the principle of risk sharing and according to high standards of diligence and professional

competence.

.

SICAFI – Real Estate Investment CompanyConcept

Autonomous Patrimony

▪ SICAFI’s are not, under any circumstance, answerable for debts incurred by shareholders or by entities that, under

the terms of the law are responsible for their management.

Private Subscription Closed End Funds

▪ Assets held only by the initial investors, being only possible the entrance of new investors by the sale of shares or

by carrying out a capital increase authorized by the current shareholders.

Capital

▪ The initial minimum capital to self-management SICAFI is € 300.000.00 (three hundred thousand euros).

▪ SICAFI can issue special category shares, of which the capital is exclusively affected to the exercise of its

activity.

SICAFI – Real Estate Investment CompanyConcept

Management, Supervisory And Owners Qualified Participations

▪ Self management SICAFI members of the board of directors:

-Individuals with good repute and professional qualification and experience;

-At least two members;

-A suitable minimum number of independent members

▪ The supervisory body of the self management SICAFI is composed by a majority of independent members.

▪ Holders of qualified participations of self management SICAFI must be suitable, taking into account a healthy and

prudent management, and the identity of new owners of qualified participations must be communicated to

CMVM.

Responsibility

▪ The members of the management and supervisory bodies of the SICAFI are jointly responsible before the

participants and before SICAFI, for non-compliance or defective compliance with the applicable legal and

regulatory duties and with the obligations arising from the incorporation documents.

SICAFI – Real Estate Investment CompanyIntervenients and Control Mechanisms

SUBCONTRACTED ENTITYSpecialized Counsels:▪ Investment and selections

of assets under the investment policies;

▪ Implementation of operations/ transactions.

▪ Back-office and Accountancy

❖ Subcontracting possibility to be decided by the board

INVESTORS

Holder of the SICAFI share capital

SICAFI

CUSTODIAN BANK▪ Responsible for the deposits of

the SICAFI values;▪ Paying shareholders their quota

of the results of the SICAFI;▪ Surveillance responsibility

(investment policy andcalculation of the shares value);

▪ Accepting deposits of thesecurities of the Sicafi, orregistering them.

BOARD OF DIRECTORS▪ Selection of of the securities

comprising the SICAFI;▪ Execution of any contracts

deemed necessary to theimplementation of theinvestment policy;

▪ Ensure the implementationof the policy for distributingresults;

▪ Comply with informationduties;

▪ Manages and supervises thedevelopment of real estatepromotion;

▪ Relationship with supervising authorities;

▪ Determines the equity ofthe shares

▪ issue shares in conjunctionwith the custodian

▪ Supervise activities inherentto the management of theSicafi

SICAFI – Real Estate Investment CompanyIntervenients and Control Mechanisms

CMVM

▪ Supervises the compliance of the applicable legislation;

▪ Elaboration of Regulations;

▪ Sanctioning Power (countermand character).

Banco De Portugal (Bank Of Portugal)

▪ Supervision of Credit Institutions and Financial Companies

Auditors

▪ Legal Certification of Accounts

Expert Appraisers

▪ Objective and precise information on real estate assets;

▪ Evaluation Reports;

▪ Registered at CMVM.

SICAFI – Real Estate Investment CompanyMain Rules

MAIN

RULES

Value of the initial

capital

Financing

Composition of

the assets

The SICAFI should start with minimum capital of € 300.000 €. In case of self-

management Sicafi it is mandatory to comply the equity of the management

companies.

The Fund must present the following structure of the asset: the value of real

estate and other comparable assets must not represent less than 2/3 of the

total net asset.

The Closed Fund of Particular Subscription has the following

indebtedness rules:

▪ Less than five participants, limitless;

▪ Five or more participants 33% of the Fund’s total asset.

REIF/SICAFI

BA

Compartimento I

Compartimento II

UP´S Cat. B

* Financial Investors

❑Capital-20% ❑IncomeDistribution– 20 %

A B

80%

❑Capital-80% ❑IncomeDistribution– 80 %

A BUP´S Cat. A

❑Capital- 25% ❑IncomeDistribution– 75 % ❑Capital-75%

❑IncomeDistribution-25%❑Priority in theIncomeDistribution

75% * Financial Investors

20%

25%

C

D

SICAFI – Real Estate Investment CompanyAutonomous Compartments

SICAFI – Real Estate Investment CompanyTaxation

Under the new regime, SICAFI’s will benefit from an exemption on certain qualifying income which iscurrently taxable, namely, investment income (dividends, interest, etc.), rental income and capital gains.These exemptions are not subject to any minimum participation requirements or holding period.

PROPERTY

INCOME

PROPERTY

CAPITAL GAINS

OTHER

INCOME

▪ Not subject ▪ Not subject ▪ Subject to CorporateIncome Tax (21%), being,

however, exempted fromMunicipal surtax and StateSurtax

IMT (municipal property transfer tax)

IMI (municipal property tax)

IS (stamp duty)

▪ Subject to general rule ▪ Subject to general rule ▪ 0,0125% paid quarterly

SICAFI – Real Estate Investment CompanyTaxation

SICAFI Income Distributed

Redemption ofUP’s

(Capital Gains)

Capital Gains from onerous transfer of UP´s

Residents

Natural

persons

Securities and Real Estate collective

investmentvehicles

28% tax rate, income definitively taxed at source,with the option to aggregate

28% with the optionto aggregate

Collective

persons

withholding tax on account forthe final tax due at a 25% tax

rate(Exception: in case there is an exemption on

income tax that excludes capital gains. In this situation the income will be taxed definitely

at source)

Aggregation under Corporate Income Tax(IRC)

Non resident1

Natural

persons and

Collective

persons

Securities Collective

Investmentvehicles

Exempt of Individual Income Tax (IRS)/ Corporatate Income

Tax(IRC)

Exempt of Individual

Income Tax(IRS)/ CorporataIncome

Tax(IRC)(includes liquidation of the

vehicle)

Exempt of Individual Income Tax (IRS) / Corporate Income

Tax(IRC)(Art. 27º EBF/DTA)

Real Estate Collective

Investment vehicles2

10% tax rate, income definitively taxed at sourceAutonomous taxationat

10% tax rate

1 It´s applicable the investors resident tax regime when the investors are:

• Residents in a country, territory or region with a clearly more favourable tax regime (Port. 292/2011);

• Collective persons owned in more then 25% by residents in the national territory.2 Income considered is income from real estate assets

SICAFI – Real Estate Investment CompanyAdvantages

✓ Professional management, through the representation authority given to the Managing Membership;

✓ The investment risk is limited by the existence of prudential rules imposed by legal and regulatory framework;

✓ The volume of assets under management, the bargaining power and the capacity to intervene in markets,

through an institutional vehicle that gives credibility to the occupation;

✓ The requirement to provide periodic reporting by managers, custodians, traders, ensures a high level of

transparency;

✓ More favourable tax status applicable to the Sicafi and to the Investors.

SICAFI – Real Estate Investment CompanyUse Examples

✓ Parking of estate assets that generate a certain income;

✓ Vehicles for estate promotion aiming a future assets’ alienation, taking advantage of the taxation applied on

capital gains;

✓ Privileged instrument for the whole commercialization of a particular asset (example: touristic enterprising,

shopping centres, hospitals) through the sale of all participation units instead of property direct sale, obtaining,

therefore, a tax optimization;

✓ Restructuring of enterprises (mainly assets without generating capital gains);

✓ Small groups of investors/promoters to enter into partnerships agreement

SICAFI – Real Estate Investment CompanyConversion of SPV into SICAFI

Before the ConversionLegal Framework – CSC -Código das Soc. Comerciais

AuditorsAuditors

Board

Shareholders /

Board Members

Board

Certified accountant

Next Step:• Change of the articles of incorporation.• Preparation of the SICAFI documentation:

▪ SICAFI Management Regulations;▪ Depositary Bank contract;▪ Certified Appraisal contract.

Advantages:

✓ Fiscal Regime;✓ The conversion is tax neutral because

there is no asset transaction.

* In case of heteromanagement,the company has to outsource theSII/ SICAFI management to a FundManagement Company

Shareholders/ Board members

SII/SICAFIBoard

Management Company*

Heteromanagement

CMC

Depositary Bank

Bank of Portugal

Auditors

Certified Appraisal

Portugal

Rua Bernardo Lima 3,1150-074, Lisboa - PortugalT. +351 213 566 400F. +351 213 566 488E. [email protected]

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Venture Capital Funds, Real Estate Investment Funds & SICAFI`s