klimaVest All FAQs at a glance

The klimaVest ELTIF is an investment fund for private investors largely independent of the stock market that invests in sustainable physical assets in the infrastructure sector. With the generation and sale of renewable electricity from wind and solar energy, the fund generated a return of 4.0 %* in the past financial year (as of: 31/10/23 - 31/10/24).

*Calculated using the BVI method (excluding initial charge, distributions reinvested immediately.). Past performance and target return statements and planned profit distributions are not indicative of future returns.

The fund is established pursuant to Part II of the Law of 17 December 2010 on investment funds established under collective investment schemes in the form of a special fund (fonds commun de placement, FCP), which is a long-term investment fund within the meaning of Regulation 2015/760 of the European Parliament and of the Council of 20 April 2015 through Europe’s long-term investment funds (the “ELTIF Regulation”) and established in accordance with the laws of the Grand Duchy of Luxembourg. The fund is managed by its management company, Commerz Real Fund Management S.à r.l. The management company acts on behalf of the fund as an alternative investment fund manager in accordance with the Law of 2013 (the “AIFM”).

Terms at a glance

S.à r.l.: Société à responsabilité limitée (in English: “limited liability company”) is the commonly used French term for the legal form of companies with limited liability in Luxembourg.

FCP: fonds commun de placement. A commun de placement fund is an investment fund established under French or Luxembourg law. In principle, the fund corresponds to the structure of the special fund or securities investment fund under German law. 

ELTIF: the ELTIF (European Long-Term Investment Fund) investment vehicle offers, for the first time, a uniform framework for funds that applies across Europe with the aim of encouraging long-term investments in the European real economy. With ELTIF, investments such as these, which were previously primarily realised through the creation of institutional investment vehicles, are now also available to private investors and smaller institutional investors. The European ELTIF regulation focuses on protecting investors through product transparency and appropriate investment information. ELTIFs are therefore subject to clear legal and regulatory framework conditions and are held in custody accounts. The klimaVest ELTIF can only be purchased after having obtained investment advice.

AIFM: Alternative Investment Fund Manager is the name given to an administrator of an investment fund that does not invest in equities, bonds or investment certificates. All other investments are described as “alternative investments”. This also includes investments in tangible assets such as infrastructure or real estate. hausInvest, Commerz Real’s real estate fund, is also an AIF according to this definition.

An impact fund is a fund that combines the themes of “sustainability” and “return”. The term “impact” describes the approach of making a “positive and measurable” contribution to achieving environmental objectives in particular. Impact funds differ fundamentally from non-sustainable funds and ESG funds.

• Non-sustainable funds: have no defined ESG objectives or strategies at product level;
• ESG strategy funds: incorporate ESG considerations into investment decisions through exclusion criteria;
• Impact funds: seek to achieve specific ESG objectives, in particular with a focus on environmental objectives, and report on the achieved and measurable impact.

Impact funds have specific objectives, such as mitigating climate change. Prerequisites for these investments are:

• A positive, measurable result – such as the avoidance of CO₂ emissions
• No damage to other environmental objectives (e.g. protection of an ecosystem)
• Minimum social requirements (e.g. guiding principles on human rights)
• Technical test criteria as well as measurement of and reporting on the contribution to the environment

The impact objective of klimaVest is to achieve a reduction in carbon emissions of around 3.5 tonnes per year per 10,000 euros in investments (equity and debt capital). This objective is a target and can of course be exceeded or fallen short of.

The vast majority of financial products in today’s market that operate with the term “sustainability” in their name or category designation are ESG strategy funds. These exclude non-sustainable investments when selecting the portfolio. For example, investments associated with armaments, oil extraction or human rights violations are identified through a screening process and are not included ("exclusion procedures").

In contrast, the achievement, measurement and reporting of positive environmental objectives, which are a constituent part of impact funds, is usually not part of the respective ESG fund strategy.

Impact funds are currently reserved primarily for institutional investors and are not accessible to private investors. klimaVest is one of the first funds to be launched specifically for private investors, making this asset class accessible to many.

Impact investments are often long-term (which means that the investment horizon should be five, or even ten years), as they invest in energy production plants with a long life, for example. This creates a need for protection on both sides of the investment: the investment assets must be protected should investor money suddenly no longer be available. Investors, on the other hand, must be protected from getting into a difficult situation because they cannot access the money they have invested in the long term.

In order to make it possible for both sides to plan better, the European Union has provided the opportunity of establishing an ELTIF since 2015. Through precise regulation, the European Long Term Investment Fund creates the conditions for private investors’ money to be available for the necessary infrastructure measures, which are required in particular to deal with the consequences of climate change.

For private investors, klimaVest makes it possible to meaningfully expand their investment base in their securities custody account within the legally prescribed investment limits, generate attractive, risk-adjusted returns and, at the same time, make a positive and measurable sustainability contribution.

• Impact funds for private investors: klimaVest is one of the first physical asset funds in the European environment to be accessible to private investors and, as an impact fund, combines the two objectives of “attractive risk-adjusted return” and “positive, measurable contribution to sustainability”.
• Sustainable financial product: in 2019, 60 percent of those surveyed in a representative study by BaFin agreed with the statement “I would like to contribute to environmental protection and climate change mitigation with my investment”.  (Source: https://www.bafin.de/dok/12603018 ). klimaVest provides a physical financial product in response to this greater need for sustainable investment.
• Attractive returns: klimaVest aims to achieve an average target return of 3.5 – 4.5%* in 2023. Distributions are made annually. Due to its nature as a fund that invests primarily in physical assets, klimaVest is expected to have a relatively low correlation with other asset classes (e.g. equity funds, ETFs) and is therefore suitable as a building block for risk diversification in the investor’s portfolio.
• Expected stable income from physical assets: klimaVest invests in physical assets that usually generate stable returns that are contractually agreed on a long-term basis. These include so-called feed-in tariffs (FiT) with often 15 to 20 years of state-guaranteed compensation or power purchase agreements (PPAs) with which individual large consumers commit to the purchase of energy, often with 5 to 15 years of legal certainty.  The fund thus enables access to solid, long-term returns with low volatility – but always dependent on wind and sun.
• CO₂ avoidance: klimaVest calculates the portfolio’s CO₂ avoidance. Using the CO₂ calculator, our investors can see how a klimaVest investment contributes to CO₂ avoidance.

*Calculated using the BVI method (excluding initial charge, distributions reinvested immediately). Statements on target returns and planned profit distributions are not indicative of future returns.

klimaVest is aimed at investors whose goal is general capital formation/asset optimisation. The investor would like to participate in the results from the operation and rental as well as the proceeds from potential sales of infrastructure investments and thereby make a positive, measurable contribution to the achievement of environmentally sustainable objectives as defined in the EU taxonomy. Investors should have a long-term investment horizon; an investment period of more than 5 years is recommended. On a scale of 1 (conservative; very low to low expected returns) to 7 (highly risky; highest expected returns), klimaVest is categorised as risk class 1 in a risk assessment. Investors could bear a financial loss of their capital employed – the possibility of total loss is limited at the fund level by diversification across various infrastructure investments and the restriction of borrowing overall, but cannot be completely ruled out. The fund is intended for investors with advanced knowledge and/or experience of investing in funds that invest in physical assets. klimaVest is not aimed at investors with an investment horizon of less than 24 months. The legally required mandatory documents can be found here.

The following are available:

• Information memorandum (sales prospectus);
• Basic information sheet;
• Reports in the form of a half-yearly and annual report.

The latest version is available here. 

As a Luxembourg ELTIF, klimaVest has an “EU passport”. However, it is mainly distributed in Germany. Registration for distribution in other EU countries is currently not planned. US persons are generally excluded.

For private investors and semi-professional investors as defined by the German Investment Code (KAGB) Section 1 (19) No. 31 (private investors) and No. 33 (semi-professional investors) the following applies:

• Investment advice (i.e. adequacy and suitability checks) must have been carried out
• The minimum investment amount is EUR 10,000
• The investment in klimaVest represents a maximum of 10 percent of the investable assets (this condition does not apply to investors with > EUR 500,000 of investable assets);
• US persons are excluded.

They are considered to be retail investors under Luxembourg law
For professional investors as defined by Section 1(19) No. 32 KAGB (institutional investor under Luxembourg law) no special investment conditions apply. However, US persons are also excluded here.

The units of the fund are distributed to professional investors, semi-professional investors and private investors as defined by Section 1(19) Nos. 31, 32 and 33 of the German Investment Code (KAGB), which meet the requirements of a qualified investor.
US persons are generally excluded.

• A combination of “return” and “sustainability”: klimaVest is one of the first tangible asset funds in the European environment to be accessible to private investors and, as an impact fund, combines the two objectives of “attractive risk-adjusted return” and “positive, measurable contribution to sustainability”.
• Stable cash flows: klimaVest aims for an average target return of 3.5 – 4.5%*, with regular, annual distributions.
• Liquid units: units are issued on every stock exchange trading day and can be freely transferred, subject to fewer restrictions.
• Module for risk diversification / low correlation with other asset classes: in the current environment, energy and infrastructure are not at the centre of the turbulence to which equity markets and oil prices have been subject. They have a low correlation with traditional asset classes such as equities and bonds and thus allow for greater diversification in the portfolio.
• Tangible assets: klimaVest invests in tangible assets. These include land or long-term lease agreements as well as technical equipment and machinery and are therefore tangible.
• Reducing carbon emissions: klimaVest offers a “CO₂ calculator”, which specifically calculates the portfolio’s reduction of carbon emissions and makes it accessible to investors. This allows investors to understand the specific contribution their investment makes to reducing carbon emissions, and how this impacts their personal carbon footprint.
• Exclusivity: klimaVest invests in assets that have so far been reserved primarily for institutional investors and are accessible to private investors in a risk-diversified form.
• Experienced team: Commerz Real has more than 20 years of experience in the field of renewable energies and infrastructure and has realised a transaction volume of over 7 billion euros to date. On average, Commerz Real has achieved a distribution of 100 percent measured against the distribution target.

*Calculated using the BVI method (excluding initial charge, distributions reinvested immediately). Statements on target returns and planned profit distributions are not indicative of future returns.

The investment objective of this fund is to achieve attractive risk-adjusted returns for investors from long-term investments within the meaning of the ELTIF Regulation, while making a positive measurable contribution to the achievement of environmental objectives as defined by the Taxonomy Regulation, in particular climate change mitigation and climate change adaptation. By pursuing its investment objective, the aim of this fund is to contribute to the achievement of limiting global warming in the long-term as set out in the objectives of the Paris Agreement of the United Nations Framework Convention on Climate Change in 2015. The objective of this fund is to hold sustainable investments as defined in Art. 2 No. 17 of the Disclosure Regulation. The fund qualifies as a product in accordance with Article 9(1) of the Disclosure Regulation. Further information on the sustainability disclosures can be found in Annex I “Pre-contractual information on the financial products referred to in Article 9(1) to (4)(a) of Regulation (EU) 2019/2088 and Article 5(1) of Regulation (EU) 2020/852”.

The fund’s investment strategy is essentially to gain control of unlisted companies or issuers within the framework of the requirements set out below. By providing funds of a permanent nature to such companies, the fund contributes to the financing of the European Union’s real economy.

In addition to its liquidity portfolio, the fund will invest exclusively in assets and companies in the infrastructure sector.

The fund will invest primarily in environmentally sustainable assets within the limits set out in the ELTIF Regulation. The AIFM intends to ensure that at least 75 per cent of the fund’s capital invested in investment assets is in environmentally sustainable assets. In this way, it finances economic activities that make a positive and measurable contribution to the achievement of environmental objectives as defined by the Taxonomy Regulation. In order to make a positive, measurable contribution to the achievement of environmental objectives, in particular climate change mitigation and climate change adaptation, the fund’s sustainable investments are exclusively taxonomy-aligned investments. The fund therefore relies, among other things, on the binding elements of the technical screening criteria of the Taxonomy Regulation in order to contribute sustainable investments to achieving the environmental objectives. As the fund invests in alignment with the EU Taxonomy, all the fund’s sustainable investments (i) emit less than 100 grammes of CO₂e per kilowatt hour or (ii) are directly linked to electricity generation, which emits less than 100 grammes of CO₂e per kilowatt hour, and (iii) meet the technical screening criteria of the Taxonomy Regulation for the environmental objectives of climate change mitigation or climate change adaptation. Further information on the sustainability disclosures can be found in Annex I “Pre-contractual information on the financial products referred to in Article 9(1) to (4)(a) of Regulation (EU) 2019/2088 and Article 5(1) of Regulation (EU) 2020/852”.

The current number of assets and the descriptions of the assets can be found here.

Valuations are carried out at least quarterly. In addition, valuations are carried out:

• before purchasing an asset;
• before selling an asset;
• at any time, insofar as Commerz Real Fund Management S.à r.l., as the AIFM of klimaVest, considers that the last value determined is no longer appropriate due to changes in significant valuation factors.

The valuation report prepared by an independent expert is checked for plausibility and validated by the valuation committee of Commerz Real Fund Management S.à r.l. and used as a basis for the internal valuation of the asset. The valuation committee then determines the value of the asset.

In accordance with the ELTIF Regulation, the fund invests in investment assets allocated to the infrastructure sector:

1. direct holdings or indirect holdings via non-listed companies in individual tangible assets with a value of at least 10 million euros. Multi-storey structures are permitted;
2. equity or quasi-equity instruments (including subordinated receivables and subordinated loans);
3. other corporate financing instruments (i.e. shareholder loans);
4. direct or indirect holdings in companies which involve the assumption of personal liability for companies in which the fund has a direct or indirect interest;
5. debt and loans, including in the form of private and public project bonds (such as convertible bonds), zero coupon bonds, debt securities, private or syndicated senior project loans, short-term credit facilities or bridging loans, mezzanine loans;
6. Investments in target funds managed by the AIFM, Commerz Real Kapitalverwaltungsgesellschaft mbH, Düsseldorf, Germany, or other alternative investment fund managers of the Commerz-Real Group qualifying as ELTIFs, EuVECAs or EuSEFs.

The indirect holdings referred to in (1) and all investments listed in (2) to (5) must be investments in qualifying portfolio undertakings within the meaning of the ELTIF Regulation.

Indirect holdings via qualifying portfolio undertakings that qualify as financial undertakings shall only take place if (1) they are a subsidiary within the meaning of Article 2(10) of EU Directive 2013/34/EU of the European Parliament and of the Council of 26 June 2013, or (2) it is guaranteed that the depositary can fulfil its custodial duties based on the look-through approach.

In addition, the fund can invest in liquidity. These must be liquid assets within the meaning of Article 9(1)(b) of the ELTIF Regulation.

Sustainability risks are integrated into the AIFM’s investment decisions for the fund as follows:

(1) The investment adviser screens potential investments using the three-tiered RSF framework, which takes into account sustainability risks, and prepares an RSF report;

(2) The investment committee takes the RSF report into account when making investment recommendations;

(3) The AIFM takes the RSF report into account in its investment decisions.

The investment adviser’s RSF framework is based on (1) the parameters of a market-driven and risk-adequate return (return parameters), (2) the parameters of a measurable positive contribution to the achievement of an environmental objective (sustainability parameters), and (3) the fulfilment of certain formal criteria (formal parameters).

In addition, sustainability risks and the risks associated with investments in ESG strategies are taken into account by the AIFM’s risk management process.

• Tangible assets: klimaVest invests primarily in tangible assets. These include land as well as technical equipment and machinery, and are therefore tangible. As an asset class (real assets), they can be most likely compared with real estate in this regard.
• Attractive returns: Investments such as in klimaVest offer stable returns averaging 3.5 – 4.5% in 2023* using the BVI method. These returns are generated via the current cash flow, i.e. operating income, and are therefore not or only to a limited extent dependent on the residual value of the investment.
• Low correlation with other asset classes: the valuation of tangible assets is based on sustainably achievable returns and is therefore largely protected against strong short-term fluctuations.
• Long-term and stable dividends: As the investments secure long-term returns, for example, through fixed prices / feed-in tariffs (legally defined feed-in tariffs with a term of 15–20 years) or power purchase agreements (purchase agreements with large customers with terms of up to 5–15 years), this results in stable and predictable returns for investors.

*Statements on target returns and planned profit distributions are not reliable indicators of future performance.

• High economies of scale and low operating costs: klimaVest invests primarily in larger parks and portfolios with a rated output of 50 MW or more, in some cases also in smaller parks and portfolios in order to provide adequate diversification both regionally and technically. The minimum size for this would be a rated output of 15 MW per park or portfolio. Large parks are characterised by low operating costs relative to generating capacity. This in turn leads to higher operating margins and therefore higher distributions to investors than for smaller parks. These fixed assets or larger plants are reserved for institutional investors in the current market environment and are not accessible to private investors.
  
• Long-term stable demand: from a historical perspective, demand for electricity is relatively stable, as the volume of electricity requested by end consumers (private households, companies, industry, transport) fluctuates little overall. The demand for electricity is constantly increasing over the long term. This results in further price security when selling electricity.
  
• Long-term cash flows: electricity is sold (a) via a state-regulated compensation system at a fixed price (feed-in tariff with a term of 15–20 years), (b) to companies with strong credit ratings (e.g. Statkraft, Amazon, Apple) for 5–15 years of current power purchase agreements, or (c) in the electricity market (spot market). This results in stable cash flows with a low default risk that can be planned in the long-term

The fund’s assets contribute in particular to climate change mitigation and climate change adaptation. In doing so, the fund focuses on economic activities that contribute to the transition to a low-CO₂ sustainable economy, including:

1. production of energy using renewable energy sources, including but not limited to land- and sea-based wind turbines, solar plants, hydro power plants, cogeneration plants and plants for using bio- and geothermal energy;
2. energy transmission and storage, including but not limited to power supply systems (electricity grids and substations), gas and district heating networks, energy infrastructures in storage technology and other energy technologies;
3. clean(er), safe(r) and (more) connected transport, transportation and mobility, including but not limited to the construction, operation and maintenance of electric charging stations, electric mobility in the form of electric cars, pedelecs, electric trucks, battery electric buses, rail and local public transport systems; and/or
4. further infrastructure investments and other assets that make a positive and measurable contribution to the achievement of environmentally sustainable objectives within the meaning of the Taxonomy Regulation, including, but not limited to, organic agriculture, forestry and agriculture, and recycling facilities.

The fund can invest in environmentally sustainable assets at any stage of development, including, but not limited to, environmentally sustainable assets in development or planning, existing environmentally sustainable assets or environmentally sustainable assets that are to be restructured. In addition, the fund can invest in environmentally sustainable assets, the primary objective of which may not be to generate returns

* The Renewable Energies Act 2017 is an amendment to the Renewable Energies Act. Further information can be found at https://www.erneuerbare-energien.de

** Assuming that upstream emissions (e.g. from raw materials and construction) are not attributed to the end user

Commerz Real has developed the “RSF framework”, which checks investments for their return potential, sustainability and formal criteria:

1. Return parameters: Investments should generate target returns averaging 3.5 – 4.5% in 2023* using the BVI method
2. Sustainability parameters: Investments must contribute positively and measurably to the achievement of an environmental objective (CO₂ avoidance);
3. Formal parameters: Investments must meet formal criteria, for example regarding permitted countries.

Each of these parameters is checked with reference to 3 types of criteria:

1. Exclusion criteria: Investments are not permitted if they are associated with an exclusion criterion (e.g. a sanctions list);
2. Minimum criterion: Investments must meet these minimum criteria (e.g. minimum investment volume);
3. Optimal criteria: Optional and ambitious objectives that go beyond minimum criteria, e.g. extremely long feed-in contracts.

This approach identifies investments that both deliver attractive risk-adjusted returns and make a positive and measurable contribution to environmental objectives while adhering to formal criteria.

*Statements on target returns and planned profit distributions are not reliable indicators of future performance.

The Commerz Real Group began its infrastructure investments in 1995 with the acquisition of the Leipzig gas network. Since then, Commerz Real Group has implemented 80 projects with a total transaction volume of around €4.9 billion. Since 2009, assets under management in the infrastructure sector have increased by almost €3 billion.

In the renewable energies sector, the Commerz Real Group can look back on 20 years of experience from the realisation of a total of 63 projects with a rated output of around 1 gigawatt. These include 50 ground-mounted solar power plants with 380 MW, 12 onshore wind farms with 170 MW and the Veja Mate offshore wind farm with 402 MW rated output. The investment volume amounts to approx. € 1.8 billion.

Sustainability

In terms of sustainability aspects, the total renewable energy portfolio under the management of the Commerz Real Group produces around 2.6 million low-CO₂ megawatt hours per year. The amount of CO₂ avoided in this way is around 1.5 million tonnes per year. The energy produced is used to supply around 869,000 households with environmentally-friendly energy. (as at 2020)

Lighthouse projects

Templin/Brandenburg solar power plant with EUR 205 million in assets under management:

• Construction of one of Europe’s largest solar power plants with 128 MWp rated output
• Thin-film solar power plants with 1.5 million photovoltaic modules from First Solar and 114 inverters from SMA
• Area: 210 hectares
• Performance payouts 2013 to 2018: 12 percent above forecast

Vejà Mate offshore wind farm with 655 million euro in assets under management:

• Existing wind farm with 67 SIEMENS wind turbines with a total rated output of 402 MW
• Location: 95 kilometres northwest of the island of Borkum
• 1.8 million megawatt hours with around 1 million tonnes of CO₂ avoidance
• Largest shareholder with 27.2 percent holding

Target achievement

Target achievement, measured using the target/actual comparison of payouts, averages 100 percent (1995–2019).

Energy grids

The Commerz Real Group has implemented a transaction volume of €1.3 billion to date in the area of energy networks. Of particular note is the acquisition of around 75 percent of the shares in the largest electricity grid operator in Germany with a total investment volume of more than €1.0 billion. Further capital increases for the expansion of north/south electric roads as part of the energy transition are in preparation. Target achievement, measured using the target/actual comparison of payouts is 102 percent.

KPMG Luxembourg S.A.

The management company of the fund (Commerz Real Fund Management S.à r.l.) manages the fund assets in its own name, but solely in the interests and for the account of the unitholders. The management tasks include the portfolio management of the fund. When making investment decisions in this context, the management company is supported by an investment committee established by the management company which focuses on sustainability issues. Investment committee meetings are held weekly. The investment committee consists of members of the management company’s portfolio management team and experts from the investment adviser (Commerz Real AG) who focus on ESG and sustainability issues.

The management company is not obliged to implement the investment committee’s recommendations and exercises its full discretion when making investment decisions. It also remains solely responsible for the portfolio management of the fund.

The management company (Commerz Real Fund Management S.à r.l.) has appointed Commerz Real AG, a German public limited company with registered offices at Friedrichstrasse 25, 65185 Wiesbaden, Germany, as the investment adviser of the fund. The investment adviser may not make any investment decisions.

The investment adviser is responsible for advising the AIFM on, inter alia, the following:

1. Management of the sustainable assets held directly and indirectly by the fund or companies with sustainable assets in accordance with the investment objective, the investment policy and the investment restrictions, as well as the ELTIF Regulation;
2. Identification and analysis of potential investments;
3. Identification and analysis of divestment options;
4. Adequate documentation of the performance and risk factors of the investments;
5. Provision of advice and recommendations to the AIFM regarding leasing, the operating business, improvements in corporate actions, financing, refinancing of investments and advising the AIFM on wealth management;
6. Support in the calculation of the net asset value;
7. Provision of advice and recommendations to the AIFM in relation to the Taxonomy Regulation and the Disclosure Regulation; and
8. Coordination of the technical review and reporting on how the assets are invested in environmentally sustainable economic activities, including the percentage of these investments in the overall portfolio, taking into account the requirements of the Taxonomy Regulation and the Disclosure Regulation.

The Board of Management of Commerz Real Fund Management S.à r.l. is responsible for the actions and decisions relating to the portfolio management of managed AIFs. This applies in particular to relevant portfolio management issues that significantly influence the business activities of a managed AIF.

Board of Management

As a Luxembourg limited liability company, Commerz Real Fund Management S.à r.l. has a Board of Management. The members are:

• Dirk Holz (Portfolio Management)
• Desiree Eklund (Compliance & Risk Management)
• Tim Buchwald (Operations & Valuation)
• Detlef Koppenhagen
• Victoria Núñez Francisco
• Christian Horf

Conducting Officer

• Stefan Schwickerath − responsible for legal matters
• Desiree Eklund − responsible for risk management
• Tim Buchwald − responsible for operations and valuation
• Dirk Holz − responsible for portfolio management

Fund Manager

• Timo Werner – responsible for fund management.

Portfolio and fund management

Core portfolio and fund management activities include:

• Rolling planning of the fund;
• Preparing decisions on buying and selling in accordance with the investment process;
• Ongoing portfolio optimisation, e.g. through negotiation and conclusion of usage contracts;
• Liquidity management;
• Technical asset management (selection, commissioning and controlling of third-party service providers such as property managers, facility managers and technicians to carry out inspection and maintenance work);
• Approval of budgeted funds for the management of fund assets;
• Interest rate and foreign currency management;
• Review of all distribution requirements and distribution approval;
• Reporting.

Risk management

Operational responsibility for the risk management of managed AIFs lies with the Conducting Officer of Commerz Real Fund Management S.à r.l. responsible for risk management, who has the necessary powers and access to all the relevant information required to perform the tasks provided for in Article 39(1) of the Delegated Regulation (EU).

In addition to risk management-related activities for the purchase, sale and financing of assets, the remit of the Conducting Officer responsible for risk management also includes activities related to ongoing portfolio optimisation, financing and liquidity management as well as valuation management. This also includes the selection, commissioning and controlling of external experts. The risk management process consists of the individual phases of risk identification, risk analysis and evaluation, risk management and response, monitoring, communication and documentation.

The risk management of Commerz Real Fund Management S.à r.l. is supported by the Commerz Real Group’s risk management investment products division as required. Commerz Real Fund Management S.à r.l. includes this in the management of risks for new and portfolio exposures, the valuation of new and existing assets and the monitoring of the risk provisioning process. Risk controlling may also involve support if necessary.

The fund has a basic term until 31 August 2070. The term may be extended twice by 5 (five) years at the sole discretion of the management company. Investors will be informed immediately of any extension.

The equity of Commerz Real Fund Management S.à r.l. is set at 2,250,000 euros and divided into 1,250 company shares with a nominal value of 1,800.00 euros per share. In addition, Commerz Real AG, as the sole shareholder, paid 8,000,000 euros into the equity reserve.

The management company and alternative investment fund manager of the fund is Commerz Real Fund Management S.à r.l. at 8 Rue Albert Borschette, Building C, L-1246 Luxembourg, Luxembourg; R.C.S. Luxembourg Section B, No. 189,252, Regulatory Authority Commission de Surveillance du Secteur Financier ("CSSF").

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"We create sustainable living environments that inspire. Success through responsibility" – this corporate purpose guides everything that Commerz Real does.

Commerz Real sees itself as a sustainable digital asset manager. Commerz Real connects people with digital investment products and sustainable material assets, giving them a home, opening up perspectives and generating energy. This is how we shape the sustainable world of tomorrow. For us, this belief is the basis of our responsibility and our success.

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The fund is an “impact fund”, i.e. it meets the corresponding framework conditions of the EU taxonomy and the EU Disclosure Regulation (Art. 9) for sustainable investments.

The assessment of whether investments are sustainable is carried out in accordance with the RSF framework.

Key question #1: Does the investment make a positive and measurable contribution to climate change mitigation or climate change adaptation?

Specifically, using the example of sustainable energy production (e.g. wind energy, solar energy, hydropower), what are the direct CO₂ emissions per kilowatt hour of electricity? Here, the fund focuses on investments that emit less than 100 grammes of CO₂ per kilowatt hour. The fund has set itself a “100-gram target” in order to support the decarbonisation of the electricity mix.

Specifically, using the example of sustainable infrastructure (e.g. power grids, substations), does the grid support the integration of clean energy into the electricity grid? Does the grid facilitate the distribution of clean electricity? In this case, the fund aims to invest in systems that are directly connected to an energy production plant that emits less than 100 grams of CO₂; or systems where at least 67 percent of the newly absorbed capacity is below the “100 grams of CO₂ per kWh” limit (measured over 5 years on a rolling basis). This ensures that investments drive the integration of clean electricity into the energy grid.

Specifically, using the example of sustainable mobility (e.g. emission-free vehicles, infrastructure for emission-free vehicles such as EV charging stations), do investments contribute to reducing the CO₂ emissions per kilometre driven or to organising and managing an entire mobility system more efficiently? For example, when investing in vehicles, the fund aims to achieve zero-emission* vehicles, including through sale-and-leaseback transactions.

* The absence of emissions refers to the utilisation phase under the assumption that emission-free propulsive energy is used (e.g. green electricity)

Key question #2: Does the investment not significantly harm any other environmentally sustainable objectives?

This is called the “Do Not Significant Harm” principle“ (DNSH). The relevant sustainable objectives that are examined here are:

1. Climate change mitigation (primary objective of the fund)
2. Climate change adaptation (primary objective of the fund)
3. Sustainable use and protection of water and the oceans
4. Transition to a circular economy, waste prevention and recycling
5. Prevention and control of harmful environmental emissions
6. Protection of ecosystems

As part of its due diligence, the fund will examine whether any of the objectives (for example, protection of ecosystems) are significantly influenced.

Specifically, using wind energy as an example, care must be taken to ensure that wind turbines do not counteract the objective “protection of ecosystems”. For example, a review is carried out to determine that wind turbines are not built in protected areas or have a negative impact on local biodiversity.

Key question #3: Does the investment meet the minimum social requirements?

Here, a review is undertaken to determine whether investments meet the minimum social requirements. Specifically, does the investment comply with the OECD Guidelines for Multinational Enterprises, the UN Guiding Principles on Business and Human Rights and the ILO Declaration? This ensures that no investments are made in connection with serious violations of minimum social standards.

The fund invests primarily in renewable energies. The investment spectrum includes, for example, wind power generation systems (both onshore and offshore), photovoltaic systems, bioenergy and hydropower. Each of these investments contributes to the decarbonisation of the energy supply.

The fund also invests in sustainable infrastructure, mobility and agriculture. By investing in these sectors, the fund is embracing further building blocks of the EU’s vision of climate neutrality, in particular the transition to clean, safe and connected mobility and the development of smart electricity and energy grids to store and deliver clean electricity to end users.

Yes, the fund intends to borrow at both fund and property level. The realisation of tailored financing solutions (so-called leverage) increases the return on equity. Commerz Real has an international network of financing partners.

Borrowing at the level of the fund is limited to a maximum of 30 percent of the fund’s equity, although borrowing may be higher for individual investments of the fund.

Indirect borrowing at the level of fund-controlled, unlisted property or investment companies is limited to an average of 60 percent of the gross asset value of all non-listed property or investment companies controlled by the fund; borrowing may be higher for individual non-listed property or investment companies controlled by the fund.

When calculating leverage, Commerz Real Fund Management S.à r.l. does not take into account any risk at the level of the non-listed real estate or investee companies controlled by the fund, unless the fund is required to bear any potential losses in excess of its interest in the relevant non-listed company. The concept does not provide for the fund holding companies with an obligation to make additional contributions.

In order to mitigate (reduce) interest rate risks, the intention is to hedge a major part of the interest payable under borrowed capital loans by concluding fixed interest rate agreements, i.e. caps or swaps. The remaining part is subject to active interest rate management by taking advantage of the respective market opportunities.

The fund will invest largely in euros on a currency-matched basis. In the case of investments in foreign currencies, the intention is to reduce the exchange rate risks arising through the borrowing of capital in foreign currencies (natural hedge). The remaining equity will be adequately hedged by the conclusion of derivatives. Currency risks may be hedged for the entire duration of the investment or, if economically meaningful, on a revolving basis for shorter periods. In the initial phase of the fund, the aim is to achieve a tendentially high hedging ratio. As the fund grows, the intention is to reassess the strategy in view of a possible change to more active currency management, taking into account risk/return considerations.

The fund is not permitted to conclude derivatives for purposes other than hedging.

In accordance with the provisions of the Law of 2010, Article 19 of the Law of 2013 and Article 29 of the ELTIF Regulation, BNP Paribas Securities Services, Luxembourg Branch, has been appointed depositary for the fund in accordance with the provisions of the depositary agreement. BNP Paribas Securities Services, Luxembourg branch has the legal form of a société en commandite par actions (S.C.A), incorporated under the laws of France, registered with the Registre du Commerce et des Sociétés of Paris under number 552 108 011, having its registered office at 3, rue d'Antin, 75002 Paris, France, and acting through its Luxembourg branch with its registered office at 60 Avenue J.F. Kennedy L-1855 Luxembourg, registered with the Luxembourg Trade and Companies Register under number B-86.861.

The depositary has been entrusted with the safekeeping and/or maintenance of records in relation to the fund assets and fulfils the duties and obligations set out in the Law of 2010, the Law of 2013, the ELTIF Regulation and the depositary agreement. In particular, the depositary ensures effective and proper monitoring of the fund’s cash flows. The depositary has also been appointed as custodian of bearer shares issued by the fund within the meaning of the Law of 2014.

Subject to due compliance with applicable law, the depositary:

1. ensures that the sale, issue, redemption, payment and cancellation of fund units are carried out in accordance with applicable national law and the Management Regulations;
2. ensures that the value of the units is calculated in accordance with the Management Regulations, the Law of 2010 and the procedures set out in Article 17 of the Law of 2013;
3. complies with the fund’s instructions, unless these instructions violate the Law of 2013, the Law of 2010 or the Management Regulations;
4. ensures that in transactions involving fund assets, the consideration is transferred to the fund within the usual time limits;
5. ensures that the fund’s income is applied in accordance with the Law of 2013, the Information Memorandum and the Management Regulations.

The depositary may not delegate the duties and obligations set out in points (1)-(5) of this section.

In accordance with the provisions of the Law of 2013, the depositary may, under certain conditions, entrust the assets, the safekeeping and recording for which it is responsible, in whole or in part, to correspondent depositaries or to third depositaries appointed from time to time. As the fund qualifies as an ELTIF, it is intended to be marketed to retail investors in addition to professional investors. Accordingly, the depositary’s liability cannot be excluded or limited by agreement and the depositary cannot be released from its liability in the event of the loss of financial instruments held in custody by a third party.

In accordance with Article 29 of the ELTIF Regulation, if the fund is effectively marketed to retail investors, the assets held in custody by the depositary may not be reused for their own account either by the depositary or by any third party to whom the depositary function has been delegated. Reuse includes any transaction involving assets held in custody, including but not limited to transfer, pledge, sale and lending.

The depositary has no decision-making power or obligation to provide advice in respect of the fund’s investments. The depositary is a service provider for the fund and is not responsible for the preparation of this Information Memorandum and is therefore not responsible for the accuracy of the information contained in this Information Memorandum nor for the validity of the structure and investments of the fund.

1. The assets are reused for the account of the fund;
2. The depositary complies with the instructions of the fund’s management company;
3. The reuse benefits the fund and is in the interest of the shareholders; and
4. The transaction is covered by high quality liquid collateral received by the fund under a title transfer agreement.

The depositary is not part of the Commerzbank Group, so there is no conflict of interest here with regard to the control activity and profitability of the fund.

In addition, the depositary does not assume any duties in relation to the fund or on behalf of the fund or Commerz Real Fund Management S.à r.l. which could create conflicts of interest between the fund, the investors in the fund, Commerz Real Fund Management S.à r.l. and itself.

We do not expect any conflict of interest between the custodianship of this fund and the custodian activity of hausInvest, as there is a functional and hierarchical separation of the execution of the tasks as the depositary of the two funds (Luxembourg and Germany). In addition, the depositary must monitor and publicly disclose conflicts of interest. In previous discussions, no (potential) conflicts of interest have become known or been identified.

In accordance with the provisions of the Law of 2013, the depositary may, under certain conditions, entrust the assets, the safekeeping and recording for which it is responsible, in whole or in part, to correspondent depositaries or to third depositaries appointed from time to time. As the fund qualifies as an ELTIF, it is intended to be marketed to private investors in addition to professional investors. Accordingly, the depositary’s liability cannot be excluded or limited by agreement and the depositary cannot be released from its liability in the event of the loss of financial instruments held in custody by a third party.

The depositary’s liability is governed by Luxembourg law.

The BNP Paribas Group already acts as a depositary for hausInvest. BNP PARIBAS SECURITIES SERVICES Luxembourg branch as the depositary and the transfer & registrar agent for the fund, is an independent, local and experienced institution with a high market reputation. The requested services are part of BNP PARIBAS’ core business and are provided to a large number of market participants in addition to the Commerz Real Group. BNP PARIBAS was selected based on a broad market approach by Commerz Real Fund Management S.à r.l. from 2019 as well as extensive benchmarking with services already commissioned by Commerz Real capital management companies. It quickly became clear that BNP PARIBAS already had extensive experience and processes that would enable the fund to be launched quickly and easily.

If an asset and/or a company is acquired by the fund and/or a subsidiary within an EU member state or a state party to the EEA Agreement, Commerz Real Fund Management S.à r.l. is entitled to a one-off acquisition fee of up to 1.5 percent (plus any taxes) of the total investment costs. If an asset and/or a company is acquired by the fund and/or a subsidiary outside an EU member state or a state party to the EEA Agreement, Commerz Real Fund Management S.à r.l. is entitled to a one-off acquisition fee of up to 3 percent (plus any taxes) of the total investment costs.

In the event of a project development carried out by the AIFM for the fund within a member state of the EU or a state party to the EEA Agreement, the AIFM may charge a fee of up to 2 percent on the developed market value. If a project development is carried out by Commerz Real Fund Management S.à r.l. for the fund outside a member state of the EU or a state party to the EEA Agreement, Commerz Real may charge a fee of up to 4 percent on the developed market value.

If an asset and/or a company is sold by the fund and/or a subsidiary within an EU member state or a state party to the EEA Agreement, Commerz Real Fund Management S.à r.l. is entitled to a one-off transaction fee of up to 1.0 percent (plus any taxes) of the selling price. If an asset and/or a company is disposed of by the fund and/or a subsidiary outside an EU member state or a state party to the EEA Agreement, the AIFM is entitled to a one-off transaction fee of up to 2.0 percent (plus any taxes) of the selling price.

When the issue price is set, an initial charge is added to the unit value. The initial charge is up to 5 percent of the unit value. The investor will not make a profit on the sale of their units until the increase in value (plus distributions) exceeds the initial charge paid on acquisition. For this reason, a longer investment period is recommended when purchasing units. The initial charge is essentially remuneration for distributing the fund units. The management company may pass on the initial charge to any distributor in order to cover distribution services.

There is no redemption fee. 

Commerz Real Fund Management S.à r.l. is entitled to a one-off structuring fee of €500,000 for the establishment of the fund.

The AIFM reimburses the investment adviser from the management fee payable by the fund to the AIFM for all the costs related to the services provided (but not the ongoing running costs of the day-to-day business) incurred by it in connection with the fund. The amount of the costs incurred is calculated in accordance with internationally recognised accounting standards and must be communicated to the AIFM on request.

In addition, the AIFM will pay the investment adviser an annual investment advisory fee in the amount of 5 percent of the costs incurred and to be taken into account in accordance with the above paragraph.

The depositary receives remuneration customary in the Luxembourg market for the services it provides, which is disclosed in the Annual Report.

The initiation, structuring und set-up costs of the fund include:

• The costs of legal advice related to the establishment and registration of the fund and subsidiaries with all the relevant authorities competent for the fund and/or the offering of fund units as well as in connection with the preparation of the fund documents, tax opinions and other explanatory documents;
  
  Establishment costs and fees related to organisational activities, including review of the agreements and structure of the fund, preparation of instruction manuals and documents, preparation and implementation of policies and procedures in the areas of risk and liquidity management, valuation, connection for operational purposes/data connection, interfaces and transfer between service providers, opening and documentation of bank accounts;
• The costs of printing and translating the fund documents into the languages required by the investors, initial registration costs and fees and other organisational costs.

All the establishment costs of the AIFM and/or the investment adviser will be reimbursed by the fund. The estimated establishment costs are around 500,000 euros.

In addition to the above remuneration, the following expenses are borne by the fund:

1. costs of external valuation;
2. customary custody and bank account fees, including customary banking fees for the safekeeping of foreign assets abroad, if applicable;
3. borrowing and management costs incurred in the management of assets (administrative, maintenance, operating and legal costs);
4. the costs of printing and mailing the sales documents required by law for investors (annual and semi-annual reports, fund documents);
5. the costs of publishing the annual and semi-annual reports, the issue and redemption prices and, if applicable, the distributions or reinvestments and the dissolution report;
6. the costs of producing and using a durable medium, except in the case of information on mergers of investment assets and except in the case of information on measures relating to investment limit violations or calculation errors in unit valuation;
7. costs for the audit of the fund and all investments and other assets included therein, whether directly or indirectly, by auditors;
8. costs of publishing the tax bases and certifying that the tax information has been determined in accordance with the rules of Luxembourg tax law;
9. costs for the establishment and enforcement of legal claims by the management company on behalf of the fund or on behalf of direct or indirect holding companies included in the fund as well as the defence of claims against the management company on behalf of the fund or against direct or indirect holding companies included in the fund;
10.  fees and costs charged by the CSSF or other government entities in respect of the fund, any direct or indirect investment companies included therein or other direct or indirect assets;
11. costs of legal and tax advice in respect of the fund, direct or indirect investment companies included therein or other direct or indirect assets;
12.  costs as well as any fees that may be incurred with the acquisition and/or use or disclosure of a benchmark or financial index;
13.  costs for the analysis of the fund’s investment performance by third parties;
14.  taxes payable in connection with the remuneration payable to the AIFM, the depositary, the central administration agent and third parties, in connection with the above-mentioned expenses and in connection with the administration and custody;
15.  the real estate transfer tax and other costs incurred in the event of the transfer of real estate of the fund (e.g. court and notary costs);
16.  costs incurred at the level of the investment companies acquired by the fund;
17.  costs for accounting under commercial law and tax law;
18.  costs of providing investment-specific research and analysis services in respect of the fund;
19.  costs for sustainability and CO₂e accounting of sustainable assets.

With regard to the above expenses, the AIFM is entitled to compensation insofar as this is for the account of the fund for the holdings in companies held directly or indirectly or the assets of these companies. The amount of the fund’s holding in the investment company must be taken into account when calculating the reimbursement of expenses. In deviation to the aforegoing, expenses incurred by the investment company as a result of special regulatory requirements applicable to the fund shall not be borne pro rata, but in full by the fund for whose account a holding in the company is held that is subject to these requirements.

In addition to the above-mentioned remuneration and expenses, the costs incurred in connection with the acquisition and sale of assets are charged to the fund. Expenses in connection with the acquisition, sale, development and encumbrance of assets, including taxes incurred in this regard, are charged to the fund regardless of whether the transaction is actually concluded or not.

Where appropriate, costs, fees and expenses borne by the fund can be charged directly to the relevant subsidiaries, noting for the sake of clarity, that this includes the costs of accounting services borne by the subsidiaries. Such accounting services may also be provided by companies affiliated with the AIFM and invoiced to the fund or the relevant subsidiaries.

All fees, expenses and reductions in accordance with the above provisions exclude value added tax (VAT) and other taxes or regulatory charges levied, which are paid in the required amount in each case.

Over the term of the fund, the target is an overall average total expense ratio of 1.85 to 2.85 percent of the average net asset value within a settlement period.

The fund issues bearer units, subject to subsequent conversion to registered units.

Units are issued daily by the management company.

The unit value is calculated by dividing the net assets of the fund by the number of units outstanding at the valuation day plus an initial charge.

Fractions of units may be issued. Fractional units are issued with up to three decimal places. Fractions do not confer any voting rights. However, the unit holder is entitled to pro rata distributions of fractions.

Initial charge: the initial charge is up to 5 percent, at the discretion of the sales partner.

It is possible (1.) after five (5) years from the launch of the fund have lapsed or (2.) if earlier, from the date when the requirements set out in the investment restrictions under the heading “General Restrictions” are met, to declare the redemption of the units on a valuation day basis and to redeem the units on each banking day ("valuation day”) under the following conditions*:

1. Unit redemptions are not temporarily suspended.
2. If an investor wishes to redeem units with a net asset value of more than 500,000 euros within a period of twelve months (the net asset value at the time of notification is relevant for the valuation), the investor must notify their depositary of the unit redemptions by issuing an irrevocable notice of redemption with a notice period of twelve months. After receiving an irrevocable notice of redemption until the actual redemption, the investor’s custodian will block the units in the custody account referred to in the notice. The investor may not transfer the units to any other proprietary or third party custody account. If an investment adviser or a company belonging to the investment adviser’s group has a participation in the fund, the foregoing restrictions shall not apply to the redemption of units held by the investment adviser or that held by the company belonging to the investment adviser’s group.
3. On each valuation day, the redemption total will be limited to 50 per cent of the fund’s assets referred to in Article 50(1) of Directive 2009/65/EC (i.e. the fund’s liquidity portfolio) and will not be required to meet short-term liabilities (including distributions already announced), fees, reserves, investments or reinvestments (including meeting redemption requests from previous valuation days).

Investors will be informed immediately in writing or by electronic means when the investment restrictions are met and of the relevant time from which redemptions are possible.*

Unit redemptions are processed via Clearstream.

The redemption amount for the redeemed units will be paid out after the net asset value has been determined on the relevant valuation day. The net asset value per unit of each day is determined on the previous bank business day. Payment will be made as per the normal timing of the depositary. Payment is made in cash; the fulfilment of redemption requests by means of distributions in kind is excluded.

The redemption can also be made by third parties. Costs may be incurred in this case. The fund is obliged to redeem the units for the account of the fund at the redemption price applicable on the valuation day, which corresponds to the net asset value determined on that day.

*For klimaVest, option 2 has been valid since the fund was launched, units are redeemed on every bank working day.

The AIFM ensures that the fund’s investments are diversified in accordance with the ELTIF Regulation so as to achieve an appropriate diversification of investment risk.

The investment restrictions set out in this point 4.5 cease to apply as soon as the fund commences disposing of the assets in order to be able to redeem investors’ units after the end of the term of the fund.

Under the ELTIF Regulation, the following restrictions must be complied with no later than the end of the initial development phase of five (5) years from the launch of the fund:

1. At least 70 per cent of the capital is invested in investment assets, in accordance with Articles 9, 10 and 11 of the ELTIF Regulation;
2. The fund may not invest more than 10 percent of the net asset value in any single investment asset. The aforementioned 10 percent investment restriction does not apply during the disinvestment phase of the fund or during the liquidation of the fund;
3. In addition, in deviation to the foregoing, the limit may be increased from 10 percent to 20 percent provided that the net asset value of the assets in which the fund has invested more than 10 percent of its net asset value does not exceed 40 percent of the fund’s net asset value. The aforementioned 20 percent investment restriction does not apply during the disinvestment phase of the fund or during the liquidation of the fund.

For the avoidance of doubt, price or value changes of assets of the fund solely caused by market fluctuations or other events beyond the control of the AIFM do not constitute a breach of the aforementioned 10 percent investment restriction; in such cases, however, the AIFM shall use its best endeavours to ensure that the fund complies with the investment restrictions again, unless the AIFM has reason to believe that this would be contrary to the interests of the fund and its shareholders.

The management company has not admitted the units of the fund to trading on a stock exchange. The units are also not traded on organised markets with the approval of the management company. It cannot be ruled out that the units will be traded on a stock exchange or on an organised market. However, the management company assumes no responsibility for trading the units on a stock exchange or on an organised market. The market price underlying stock exchange trading or trading in other markets is determined not only by the value of the assets held in the fund, but also by supply and demand. Therefore, this market price may differ from the net asset value.

Should the management company list the units on the stock exchange, this Information Memorandum will be updated in particular taking into account the Law of 16 July 2019 via the securities prospectus.

Every morning at 9 a.m., data and e-mail information is provided to selected sales partners via WM.

The fund has both an ISIN (LU2183939003) and a WKN (KLV100).

The units can be purchased from 02/11/2020.

To the extent required by Luxembourg laws and regulations and within the limits applicable under Luxembourg laws and regulations, the AIFM calculates the net asset value on each valuation day in accordance with Lux GAAP and the fair value valuation rules described below, while taking into account the AIFM’s valuation policy. The net asset value is determined on each bank business day (Germany and Luxembourg) for the following bank business day.

In order to calculate the issue price and the redemption price of the units, the AIFM, under the control of the custodian, determines the market values of the assets belonging to the fund on a quarterly basis, less any loans and other liabilities and provisions of the fund (net asset value). Dividing the net asset value by the number of units issued provides the net asset value per unit.

Income in the fund consists of the valuation effects from the assets and the realised income from the investment companies in the form of distributions to the fund. Costs for the management of the assets, management of the companies and of the fund as well as other costs that can be charged to the fund in accordance with the Information Memorandum (prospectus) (e.g. transaction costs, tax advisory and legal advisory costs in connection with the fund, the companies and the assets, design costs of the fund, audit and publication costs as well as costs for the valuation of the assets) reduce income. In addition, the returns are influenced by income equalisation.

Income equalisation is calculated at the end of the financial year. Income equalisation is the income and changes in value accrued since the beginning of the financial year, which were payable as part of the issue price by the unit purchaser in the reporting year or were compensated by the fund as part of the redemption price when the units were redeemed. The income equalisation shown in the income statement relates to the ordinary net income, the realised gains / losses and the profit carried forward from the previous year. As a result, with the income equalisation, the distributable amount per unit is not affected by changes in the outstanding units.

In principle, the management company distributes the income realised during the financial year for the account of the fund and not used to cover costs from the assets, holdings and other assets – taking into account the associated income equalisation – provided that such a distribution would not result in the overall value of the fund falling below the amount of the minimum capital. Distributions from retained earnings are not permitted.

Amounts required for future repairs must be deducted from the previously determined earnings. Amounts required to offset impairments of the investments made or required for future investments within a year may be withheld at the discretion of the AIFM. The AIFM decides annually whether the remaining income will be distributed to investors or carried forward to the next year.

Capital gains – taking into account the associated income equalisation – and interest on own funds for construction projects, insofar as they remain within the limits of the prevailing market interest rates on project developments saved, can also be used for distribution.

Distributable income may be carried forward for distribution in subsequent financial years. The distribution is made per unit issued.

Distribution is made annually immediately after the Annual Report is published. In addition, the management company may make interim distributions during the year.

Irrevocable distributions are excluded and distributions in kind are not permitted.

After each distribution made by the management company, each investor will be given the opportunity to retain the amounts distributed by the fund or to reinvest such amounts in fund units.

Paragraph 14 of the Information Memorandum briefly summarises some important Luxembourg tax principles that may be or may become relevant to the fund. This summary is based on the laws, regulations and practices in force and applied in Luxembourg as at the date of the Information Memorandum. The statements are subject to possible changes in the laws or their interpretation that become effective after this date (possibly with retroactive effect).

Although this summary is based on the laws currently in force in Luxembourg, it does not constitute legal or tax advice and should not be construed as such. It is provided for information only. Prospective investors are advised to consult their own tax advisers regarding the tax consequences of an investment in the fund. This includes, but is not limited to, the effect of state or local taxes or church taxes under Luxembourg law and, in the case of investors not resident in Luxembourg, the tax consequences in the respective countries of residence. This also applies to cases where there are doubts about the tax position of certain aspects or transactions associated with an investment in the fund.

This summary is a brief outline of the fund’s view on the tax implications of an investment in the fund. However, it does not constitute a guarantee that these tax and legal consequences will also occur. The summary may not form the sole basis for assessing the tax impact of an investment in the fund, in particular because the tax impact will depend on the specific situation of each investor. The brief outline is therefore limited to a summary of possible tax effects.

We do not claim that this section fully summarises the tax rules and practice currently in force in Luxembourg, nor that it contains any explanations of the tax treatment of an investment in the funds in jurisdictions other than Luxembourg. In addition, this section does not address how the taxation of the fund is structured in other jurisdictions or how the taxation of subsidiaries, partnerships and intermediary companies of the fund or investment structures in which the fund has a holding in a specific jurisdiction is structured.

Prospective investors are advised to consult their own professional tax advisers with respect to the potential tax consequences of buying, holding, redeeming, converting or selling shares in the fund under the laws of their country of citizenship, residence, domicile and incorporation.

Investors are fully responsible for the fulfilment of their obligations under the respective national tax law.

As of the date of the Information Memorandum, the fund is not subject to Luxembourg corporation tax, trade tax or wealth tax. However, the fund is subject to a subscription tax of 0.05 percent p.a. calculated on the basis of its net assets, which are determined or are to be transferred at the end of a calendar quarter. The fund must comply with quarterly reporting requirements in respect of subscription tax. Reports are submitted under the supervision and responsibility of the AIFM.

However, the value of assets in the form of units or shares in other collective investment schemes is exempt from subscription tax provided that such units or shares have already been subject to this tax. Apart from a flat-rate registration tax of 75 euros payable on establishment and if future amendments are made to the management regulations, no stamp duty or other taxes will be payable on the issue of units by the fund.

To the extent that the fund receives dividends and interest on its investments, such dividends and interest may be subject to (withholding) tax in the relevant countries where such (withholding) taxes are normally non-recoverable (although the fund or its investors may be eligible for withholding tax reductions or exemptions under the applicable double taxation agreements as may be applicable from time to time). Income tax and capital gains tax may be due in the respective source country. In addition, the fund may also be subject to other foreign taxes.

Investors are not subject to any withholding tax or taxation on income or capital gains in Luxembourg solely on the holding, sale, purchase, transfer or repurchase of fund units (except for investors domiciled, resident or having a permanent establishment in Luxembourg).

Luxembourg: No withholding tax will be levied on distributions or gains arising on the disposal or redemption of units in respect of investors not resident in Luxembourg for tax purposes.

Germany: Investment income for tax residents (private investors) is generally taxed at a flat rate of 25 percent plus the solidarity surcharge and, if applicable, church tax (except for exemption orders or offsetting against losses).

If fund units are held via a domestic custodian bank, the tax is levied by the latter as withholding tax and transferred to the tax authorities (deductible tax). See also the explanations above.

At the investor level: As the group of investors is currently based on natural persons subject to income tax, corporation tax is not applicable. Should the investor focus change, e.g. to institutional investors subject to corporation tax, the corporation tax effects on these investor groups would have to be added.

At the fund level (Luxembourg): As a regulated investment asset, the fund vehicle is not subject to corporation tax or comparable income tax or taxes on earnings in Luxembourg. Luxembourg “only” applies a one-off capital tax when the fund is established and, subject to possible exemption options, a special fund tax (taxe d'abonnement) of 0.05 percent p.a. on the net asset value of the fund vehicle.

At the fund level (Germany): As a foreign investment fund, the fund vehicle is subject to corporation tax to a limited extent. Due to the planned structuring of the fund, however, no corporation tax should arise in Germany at the level of the fund vehicle.

All distributions from the fund vehicle generally represent taxable investment income (income from capital assets) for tax residents. This also applies to any disbursements of excess liquidity of the fund vehicle. Tax-neutral distributions (capital repayments) are only possible in the context of the settlement of the fund vehicle in accordance with the special provisions in Section 17 of the German Investment Tax Act (Investmentsteuergesetz: InvStG).

Investors in the fund vehicle resident in Germany (hereinafter referred to as tax residents) are subject to the non-transparent taxation regime in accordance with Sections 16 to 24 of the German Investment Tax Act (Investmentsteuergesetz: InvStG). According to the Act, investors are generally subject to taxation in Germany on the investment income derived from the units in the fund vehicle. Investment income includes:

1. Distributions of the fund vehicle;
2. Advance lump sums in relation to units in the fund vehicle;
3. Gains on the disposal of units in the fund vehicle.

Under certain conditions, a flat-rate exemption (partial exemption) may be possible for certain investment income from the units in the fund vehicle. Due to the planned structuring of the fund, no partial exemption is currently expected. However, partial exemption (equity exemption) cannot be definitively ruled out. The possibility of claiming such a partial exemption will be reviewed on an ongoing basis.

Private investors subject to income tax

For the investor group of natural persons in focus here, the following consequences arise: For private investors subject to income tax, investment income is regarded as income from capital assets. Subject to the application of a partial exemption from investment income (see above), the investment income is fully taxable. The savings allowance (€801 or €1,602 for co-assessed spouses and partners) can be taken into account for tax purposes. The taxable capital income is generally subject to a special income tax rate of 25 percent (plus a solidarity surcharge of 5.5 percent of the income tax incurred as well as any church tax on income tax). Tax is generally withheld as withholding tax from the paying office (deductible tax).

Corporate investors subject to income tax

In principle, there is also income from capital assets, but insofar as the units in the fund vehicle are held as business assets for tax purposes, the investment income from units in the fund vehicle is reclassified as business income. Subject to the application of a partial exemption, which cannot be ruled out (see above), the investment income is also fully taxable. Investment income is subject to general taxation at a progressive rate of up to 45 percent (likewise plus solidarity surcharge and church tax, if applicable).

If the units in the fund vehicle are held in a German industrial or commercial enterprise, the investment income is also subject to trade tax. A reduction in trade tax on income from units in the fund vehicle is possible under certain conditions. Any resulting trade tax burden can be offset against the income tax liability on a flat-rate basis.

Other investors

In case of doubt, there are specific tax assessments for another group of investors (institutional investors), each of which should be subjected to individual considerations at investor level.

Foreign investors

No generally valid statements can be made for investors resident abroad. Investors resident abroad should inform themselves in detail about the respective tax consequences by consulting a tax adviser before acquiring units.

The Luxembourg fund vehicle in the form of an FCP (fonds commun de placement) qualifies as a foreign investment fund in accordance with Section 1(2) in conjunction with Section 2(3) of the German Investment Tax Act (Investmentsteuergesetz: InvStG). Foreign investment funds are considered as assets in accordance with Section 2 No. 1 of the German Corporation tax Act (Körperschaftsteuergesetz: KStG) and are subject to limited corporation tax. Under German law, the fund vehicle is therefore fiscally opaque.

This is not a special investment fund as defined by Section 26 InvStG.

Under Luxembourg law, a fund vehicle in the form of an FCP is fiscally transparent.