Audit and reporting

Audit and reporting

Financial statements and the audit report

For funds submitted to the Fund Law, an audited annual report and unaudited semiannual report are to be made available free of charge to share/unit-holders and sent to the supervisory authority within four months and two months, respectively, of the financial period-end. For SIFs, this period is extended to six months for the audited annual report and there is no requirement to produce semi-annual accounts.

The annual report should include at least the following:

  • a management report;
  • a statement of assets and liabilities;
  • a detailed income and expenditure account;
  • a report on the activities of the past fiscal year;
  • the portfolio of the investments;
  • a statement of changes in net assets;
  • the number of shares/units in circulation and the value of Net Asset Value per unit/share;
  • statistical information with regards to total Net Asset Value and Net Asset Value per unit/share over the last three fiscal years.

The semi-annual report includes the same information with the exception of the detailed income and expenditure account, the statement of changes in net assets, the statistical information over a three-year period and the management report which may be omitted. As indicated above, the semi-annual report is not mandatory for SIFs.

  • Financial information is prepared under Generally Accepted Accounting Principles applicable to investment funds in Luxembourg (“Luxembourg GAAP”). Derogation to use different GAAP like IFRS can be obtained;
  • The accounting information included in the annual report of a Luxembourg fund has to be audited by a Luxembourg authorised auditor (“réviseur d’entreprises”), approved by the CSSF. The auditor’s report must certify that the financial statements give a true and fair view of the financial position of the UCI and of the results of its operations and changes in its net assets for the period, in accordance with Luxembourg legal and regulatory requirements relating to the preparation of the financial statements.

The auditor also has a legal obligation to inform the CSSF if the accounting information does not present a true and fair view of the UCI’s financial position.

In addition, he is also bound by such reporting obligation if he becomes aware that the assets of the UCI are not or have not been invested in accordance with the respective legal requirements or the provisions of the prospectus.

What’s more, the Luxembourg investment funds must provide to the CSSF a monthly set of figures. This is generally performed by the central administration in Luxembourg.

The Long Form and the auditor reporting

In addition, the auditor must produce the so-called Long Form Report describing and testing the UCI’s activities. This Long Form Report is solely for the attention of the Board of Directors of the SICAV or of the management company and the CSSF. It covers defined areas including, among others, an evaluation of key internal control procedures existing at the central administration and depositary bank, Anti-Money Laundering provisions, valuation methods, description of the Risk Management system, etc.
SIFs are not subject to a Long Form Report.

The auditor should also prepare a specific report in case of material net asset calculation error and/or investment breaches that lead to a compensation of the UCI and/or its investors in accordance with the principles detailed in the CSSF circular 2002/77.

In addition to these tasks foreseen by law or regulation, the CSSF also often requests the auditor to issue specific certificates or attestations concerning e.g.:

  • the pricing of OTC derivatives, where the auditor will have to confirm the pricing model and list of parameters;
  • the calculation methodology of performance fee
  • the validity of an outsourcing model and its conformity with local regulation.

Management companies

Both UCITS and non-UCITS management companies, as regulated entities, must be audited by a Luxembourg authorised auditor, who can demonstrate an adequate professional experience. The CSSF may define the scope of the auditor’s mandate and the contents of the audit report of the annual accounting documents of a management company. In any event, the auditor has a general obligation to report to CSSF if, during the audit of the accounts, it becomes aware of any fact or decision which is likely to constitute a material breach of the law, impairs the continuous functioning of the management company or may lead the auditor to refuse to certify the accounts or to express reservations.

CSSF, using the auditor as its watchdog, may request it to perform controls on particular aspects of the activities and operations of a management company, at the expense of the management company.