Sweden Regulation. 2.1 Type of funds. 2.2 Laws. 2.3 Managers, trustees, and custodians. Manager

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1 Sweden Regulation FUNDS AND FUND MANAGEMENT Type of funds Open-ended mutual funds are organized in Sweden as värdepappersfonder or specialfonder, jointly called investeringsfonder (referred to below as investment funds). These investment funds can only be established under the Swedish legislation on collective investment undertakings. The Swedish legislation on collective investment undertakings is based on the EU UCITS Directive. The värdepappersfonder are harmonized funds whereas the Specialfonder are non-harmonized funds. The specialfonder are granted exceptions from the investment restrictions that apply to the värdepappersfonder. Hedge funds are examples of specialfonder. The investment funds are not legal entities but are treated as separate taxable entities. The investment funds may be either accumulating or distributing openended mutual funds. An investment fund can invest exclusively in shares or in bonds or in a mix of securities and other financial instruments. 2.2 Laws The formation and supervision of investment funds is governed by The Investment Funds Act (Sw: lagen (2004:46) om investeringsfonder). Additional regulations are issued by the Swedish Financial Supervisory Authority (Sw.Finansinspektionen). 2.3 Managers, trustees, and custodians Manager Fund operation, that is, the management of an investment fund and the sale and redemption of units in the fund is carried out by a fund management company. The management company must be a Swedish limited company that has been granted a license to manage the investment fund. The minimum capital requirements in the UCITS (III)-directive are applicable.

2 2 Sweden Regulation The management of a specialfond is carried out by a Swedish fund management company or a licensed Swedish Securities company. A fund management company may charge management fees (including performance related fees) and fees related to sales and redemptions of units. The fees must be disclosed but there is no regulation regarding the level. Custodian The depositary of an investment fund must be a Swedish bank or other credit institution or a Swedish branch of a Credit Institution within EES. The depositary acts as a custodian of the assets of the fund and administrates incoming and outgoing payments in respect of the fund. The depositary shall also ensure that the assets of the fund are used in accordance with the legislation and the fund rules. The depositary may be part of the same group of companies as the fund management company. The depositary and the fund management company must however act independently of each other and exclusively in the interest of common interest of the unitholders. There are no legal limits to the fees charged by the custodian. 2.4 Investment restrictions Värdepappersfonder The investment restrictions of the UCITS (III) directive are applicable to a värdepappersfond. Specialfonder A specialfond is granted exceptions to the investment restrictions upon application (see 2.9 below). 2.5 Borrowing An investment fund itself is not permitted to borrow. However, the management company may take up short term loans on behalf of the fund not exceeding 10 percent of the value of the fund. A specialfond may borrow for the purpose of leverage (see 2.9 below). 2.6 Accounts and prospectus An investment fund must publish its accounts both semiannually and annually.

3 3 Sweden Regulation There shall be an up to date prospectus on every fund. The Swedish Financial Supervisory Authority has issued a regulation regarding the content of the prospectus. The prospectus is, however, not to be approved by the authority. A simplified prospectus must be published in addition to the full prospectus. The prospectus and annual or semi-annual report shall be offered and on request sent to potential investors. The annual accounts of the Swedish funds are audited by the auditors of the fund management company. Regulations prescribe that an investment fund must give, in an annual account statement or otherwise, detailed information as to the fees that are actually charged including commission paid by the fund. 2.7 Supervision The supervisory authority in Sweden is the Financial Supervisory Authority (Finansinspektionen), P O Box 7821, S Stockholm. Management companies and depositaries must submit to the authority the information on their activities and associated circumstances on request. Management companies must pay annual fees to finance the work of the authority. 2.8 Fund ownership There are no restrictions on the size of the holding in an investment fund which any person or group of persons may hold. There is no minimum number of unitholders in an investment fund but the fund must be open to the public (that is, to all investors who are able to invest the minimum capital stipulated in the fund rules). The supervisor has however stated that the purpose of an investment fund should be collective investments. Subject to the approval of the Swedish Financial Supervisory Authority, the fund rules of a specialfond may contain limitations on the possibility to acquire units. 2.9 Fund structure As stated above a Specialfond is granted exceptions from the investment restrictions in the Investment Fund Act. There is however no possibility to establish closed end funds (the fund must permit redemptions at least once a year) or umbrella funds under the Swedish regulation. Examples of specialfonder are hedge funds that may borrow, take short positions, concentrate the investments, and use derivatives extensively.

4 4 Sweden Regulation 2.10 Stock exchange Seven exchange traded funds are listed on the NASDAQ OMX Stockholm Exchange. There is no public regulation regarding listing of funds but this is governed by the rules of the stock exchange Bank secrecy The relationships between private individuals and investment funds, management companies and depositaries may not be improperly disclosed. Activities concerning official matters are subject to the Secrets Act (1980:100). The Financial Supervisory Authority has published guidelines to banks and other financial institutions, including fund management companies with respect to money laundering Fund set-up Usually it takes between two and three months to set up an investment fund in Sweden. Fees differ widely depending upon the circumstances. A useful estimate is therefore not possible Foreign funds A management company domiciled in a state within the EEA may conduct fund operation (see 2.3) in Sweden without obtaining permission, provided that the company is authorized to carry on such activities in its country of domicile and arrangements are made to make payments to unitholders, redemption of units, and the provision of information required in Sweden. Other foreign management companies are required to obtain a license from the Financial Supervisory Authority, before commencing activities in Sweden. Marketing that does not include any fund operation requires no permission. The distinction between marketing and fund operation is however not clear and it is recommended to seek advice before entering into marketing of foreign funds in Sweden. No exchange control restrictions exist in Sweden Bearer shares The management company is required to register all unitholders. Bearer shares are not allowed.

5 5 Sweden Regulation 2.15 Use of the internet The use of the internet as a marketing tool for trading units in investment funds is steadily increasing. In general, internet users in Sweden are increasing in numbers, especially internet banking customers. Fund supermarkets on the Internet have been launched during recent years. KPMG in Sweden Håkan Östebo KPMG AB Tegelbacken 4 A Stockholm S Sweden Tel Fax hakan.ostebo@kpmg.se The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation.