1. 1 SIICs and OPCIs Listed and unlisted real estate investment schemes in France Marc Cretté FIDAL

2. 2 The French SIIC regime: Advantages The French SIIC is a favorable tax regime applicable to listed companies investing in French properties. Entry into force: financial years closed in 2003 Main advantages: No corporation tax on passive real estate profits and capital gain. Tax incentive to real estate outsourcing : up until December 31, 2008, corporate owners transferring buildings (and financial lease) to SIIC would be subject to capital gain tax at 16,5% (instead of 34,43%) No specific limitations in respect of leverage/indebtedness Possibility for a foreign REIT to benefit from the French SIIC regime for the French investments through a French permanent establishment and a double listing Competitive tax regime compared with other EU REIT tax regimes Positive impact on the NAV ( IFRS Standards)

3. 3 The French SIIC regime: scope and constraints Minimum share capital: € 15,000,000. 95 % subsidiaries or subsidiaries held by SIIC’s JV (minimum of 5% share capital for each SIIC) can elect Listed on the French stock exchange or foreign listed entities dual listed on the French stock exchange. The main activity of the SIIC must be (passive) investment in real estate. Financial leasing may not exceed 50% of the company’s gross assets Other activities may not exceed 20% of the company’s gross assets. The tax privileges do not apply to these other activities

4. 4 The French SIIC regime: scope and constraints The direct or indirect holding into a SIIC by a single shareholder or by a group of shareholders acting in concert shall not exceed 60% of the share capital or voting rights in the SIIC to benefit from the SIIC regime (however, this threshold does not apply if the shareholder is also a SIIC). In addition, the floating capital should amount at least to 15% on the election date. Entry charge (exit tax) 16,5% of latent gain on existing assets. No taxation on new acquisition. No P&L impact if election for the accounting step up, exit tax off settable against reevaluation reserve.

5. 5 The French REIT regime: distribution to shareholders Payout requirements: 85 % of taxable profit deriving from rental income to be distributed before end of N+1 50 % of taxable capital gains (consist of sale of real estate, shares in a subsidiary, interest in a qualifying real estate partnership) to be distributed before N+2 100 % of dividends received by the SIIC from a SIIC subsidiary to be distributed as at end of N+1

6. 6 The French REIT regime: distribution to shareholders Taxation of the shareholders: Distributions of tax free income treated as taxable dividends in the hand of French resident shareholders For foreign shareholders: withholding tax capped to Double Tax Treaty. For Swedish shareholders 15% withholding tax if individuals, 0% withholding tax if corporate shareholders with at least 10% shareholding. (theoretical corporation tax liability on capital gain on shares of French SIIC for corporate shareholders). Distributions to corporate shareholders are subject to a 20 % levy where said shareholder: holds directly or indirectly more than 10 % of dividend rights of the SIIC (except if paid to a SIIC) and is exempt from CIT in his country (or subject to a low taxation) (“Spanish Syndrome”)

7. 7 OPCI: legal aspects The French Government created a new type of non-listed real estate collective investment scheme, called OPCI. The OPCI may take the form of a real estate fund (joint-ownership of real estate assets without legal personality, FPI) created on the joint initiative of a management company and a depositary, or a real estate company (limited liability company with variable capital, SPPICAV). The assets of an OPCI must be composed as follows (except for certain OPCI (RFA) dedicated to institutional investors) : At least 60% of eligible real estate assets (direct holding of properties, real estate companies, etc.). In addition an OPCI must in principle hold at least five different buildings, rented or offered to be rented. At least 10% of liquidities

8. 8 OPCI: legal aspects OPCIs combine: A management company (under the supervision of the Autorité des Marchés Financiers) ensuring the management of the OPCI. A custodian, ensuring The custody and the monitoring of the inventory of the OPCI assets with the exclusion of the real estate assets The monitoring of the OPCI’s real estate assets The regularity of decisions made by the SPPICAV and the management company Two real estate valuers, acting independently one from each other. They will determine the net asset value of the OPCI, on which will be based the redemption price of the units/shares. In the FPI only: A supervisory board, composed solely of unit holders

9. 9 SPPICAV Income and profits derived by the SPPICAV CIT exemption on all income / profits realised by the SPPICAV The exemption from CIT is subject to distribution requirements: 85% of land revenues 50% of capital gains 100% of the dividends paid by subsidiaries exempt from CIT Income distributed by SPPICAV All revenues paid and capital gains realised by SPPICAVs (i.e., arising out of the land, securities and liquidities) qualify as dividend Application of the French 25% withholding tax on distributed income, subject to the application of the provisions of the tax treaties signed by France, as the case may be Question: would the tax treaty apply?

10. 10 FPI Set up in order to replace SCPI and to give liquidity to individual shareholders → “retail product” The FPI is not a legal entity (i.e., transparency of the fund) => the FPI is outside the scope of application of the French CIT Revenues are directly subject to taxation at the level of the unitholders FPIs are subject to a distribution requirement equal to 85% of the distributable amount of (i) each type of received revenue (i.e., land revenues, securities and liquidities revenues), and (ii) capital gains realised on the disposal of real estate assets, securities and liquidities

11. 11 Conclusion The French SIIC regime offers a good compromise which perfectly fits with investments predominantly made on the French market, which explains its success story. Due to their tax regime, the French SIICs can propose the most competitive offers on the French market. The new OPCIs, which are unlisted, will offer great opportunities to French and foreign investors. The FPI is more dedicated to individuals than to institutional investors. For the latter, the SPPICAV seems more attractive. However, conversely to the SIIC regime, the tax regime applicable to OPCIs is not finalised yet particularly for the SPPICAV and foreign investors (application of the tax treaties, VAT regime, 3% real estate tax, etc.).

12. 12 Contact Marc Cretté Tax Lawyer Phone number : 00 33 1 55 68 16 40 Fax number : 00 33 1 55 68 14 00 email : mcrette@fidalinternational.com