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      Exchange Traded Funds

      There is no legal definition of an Exchange Traded Fund, or ETF. In principle, any investment fund traded on the stock exchange could be considered as such.

      Nevertheless, the great majority of ETFs in existence today can be distinguished by the fact that they passively reproduce a financial index. This does not prevent actively managed funds (that is, funds for which investment choices are based on prior research and analysis) from also being quoted and traded on a stock exchange.

      The reproduction of an index can be achieved either in the traditional way, by directly holding a basket of assets that faithfully reproduce the underlying index, or synthetically, by the use of derivative instruments.

      In Luxembourg, both methods for reproducing an index are authorised. In order to qualify as a UCITS (undertaking for collective investment in transferable securities) benefiting from the European passport, Luxembourg ETFs must respect the investment restrictions laid down in Part 1 of the law of 17 December 2010 on undertakings for collective investment.

      If Luxembourg ETFs meet the double condition of being quoted on the stock exchange and having as their sole objective to reproduce one or more indices, they are exempted from the annual subscription tax (taxe d’abonnement).