Michael Lange Managing Director		Eric Chinchon General Manager
	www.mmanco.lu

Making a substantial difference as a service solution provider in the Luxembourg financial centre

// Introduction

Mercuria Management Company S.A. ("MMC") was launched on January 12, 2006 as a wholly owned subsidiary of Mercuria Services S.A.

MMC is a management company pursuant to Chapter 13 of the Law dated 20 December 2002 relating to undertakings for collective investments (the "2002 Law").

The company not only offers an alternative solution to the provision of a local conducting person in order to meet the substance requirements resulting from the 2002 Law but also provides support to Conducting Persons/Directors of other Management and Investment companies...

MMC delegates the following activities to external professional service providers:

// Investment Management
// Distribution
// Administration

In order to fulfil its duties MMC has developed the following services:

// Due Diligence / Client Profile Analysis

Central to our service offering is the undertaking of a thorough due diligence of the proposed or existing structures, products and systems that the promoter and/or the existing investment/management company have in place. Once this due diligence procedure is completed MMC is in a position to:

// Perform a gap analysis
// Propose solutions
// Prepare a project plan to rectify and/or implement activities based on the solutions agreed
// Formulate a binding service proposal
// Negotiate and conclude agreement of terms

// Supervision of the delegated functions

MMC supervises delegated functions through regular reporting received from the various service providers, investment managers and distributors.

These reports cover, among others, the following aspects:

// Key Performance Indicators versus agreed benchmarks in the Service Level Agreements
// Performance review and analysis of the investment managers
// Compliance with AML and KYC requirements
// SAS 70 Reports
// Investment policy and restrictions

Besides the external reports, MMC has implemented highly automated controls over the NAV calculation performed by the central administration. These controls are as follows:

// NAV Fluctuation versus an appropriate index:

MMC provides NAV controls and calculation checks through its internal control tool. The internal software provides benchmarking of the performance of a fund by comparing the result to a relevant market index (this index can be a known market index or composite index build automatically). If a deviation is noted, the tool allows drilling down either to particular portfolio positions and/or accounting movements. (Provided that the central administration delivers the needed data)

// Independent valuation of the portfolio

One module of MMC’s internal control tool allows an independent review of the pricing used for the NAV calculation. It enables MMC to check the plausibility of the pricing (if those prices are available for comparison from data providers such as Financial Times, Bloomberg…) used for the valuation of the fund portfolio.

// Journal entries review

One module of MMC’s internal control tool allows to trace a transaction through different accounting journals and in this way provides the audit trail of any accounting transaction.

After having performed this supervision, MMC is in the position to provide executive summaries not only for its own clients but also as support to conducting person/directors giving an assessment on the quality delivered by all parties involved in the day-to-day business of the investment company, management company…

// Risk Management

The management of a UCITS must employ a risk management process enabling it to measure and monitor at any time the risks stemming from the positions and their contribution to the overall risk profile of the portfolio.

The global exposure relating to the use of financial derivative instruments may not exceed the total NAV, taking into account the current value of the underlying, the counterparty risk, foreseeable market movements and the time to liquidate the positions.

A distinction must be made between UCITS which may be considered as "non-sophisticated" and those which are considered as "sophisticated", based on the extent of usage of derivative instruments and their complexity.

After analysis of the procedures, systems and reporting in place at the investment manager and having ascertained that the risk management function is segregated from the investment manager function, MMC accepts that the risk management is performed at the investment managers.

Otherwise, MMC delegates to Mercuria Independent Risk Solution the Risk Management Function. The latter has in place different systems allowing it to measure the risk of each position in the portfolio and the contribution of each position to the total risk of the fund.

In both cases, MMC receives on a regular basis, depending on the complexity of the funds, reports in order to analyze them independently.

// Central Administration Transfer Agency for Specialized Investment Fund.

Following the law dd. February 13, 2007, regarding Specialized Investment Fund (“SIF”) and to answer a specific demand from the market, MMC has adopted a new line of business by providing central administration and transfer agent services for SIF-products.

MMC does not enter into competition with big central administration, but is more focused on a niche clientele who would like to enter this market by launching SIFs. The structures in focus bear the following features:

• Limited number of investors: 50 maximum in principle
• No investment in sophisticated financial products
• Average size of funds is limited (+/- €50 Million)
• Limited number of holdings in the portfolio

Therefore the targeted clientele includes high net worth individuals, family offices, private banks … who would like to launch a SIF but with customized central administration focused on this business line.

//Manager profiles:

The management committee of MMC is composed of:

Michael Lange (Managing director) and Eric Chinchon (General Manager)

Michael, an investment banker by trade, broadened his professional experience in the financial markets on New York’s Wall Street, starting in 1988 before being recruited to the financial center in Luxembourg in 1992. His knowledge of the financial markets and instruments along with 12 years experience in leading positions within the fund industry of Luxembourg endorse the company’s specialist pool.

Eric has gathered 5 years experience in the Luxembourg financial services industry as auditor. The company benefits from his knowledge in fund audit and fund accounting. Furthermore, he provides external training on classic and complex accounting for UCI at IFBL (Institut de formation bancaire Luxembourg). Eric holds a diploma from the Business School of Dijon, France.

In order to deliver all the above mentioned services Mercuria Management Company was able to recruit the qualified business profiles to build a sophisticated team handling all matters with their profound knowledge and special qualifications.

 

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