ERASMUS INTENSIVE PROGRAM 2012

Transcription

1 ERASMUS INTENSIVE PROGRAM 2012 ECONOMIC ANALYSIS OF NON-UCITS IN EUROPE Authors: Krase Nicolas Pilavaki Eleni Tutor: Dr Nishiotis George

2 CONTENTS 1. ABBREVIATIONS 2 2. ABSTRACT INTRODUCTION.4 4. UCITS.5 5. ICIS PRIVATE ICIS LEGAL FORMS OF PRIVATE ICISs TRENDS IN CYPRUS UCITS VS NON UCITS COMPARISON OF NON UCITS AMONG EUROPEAN COUNTRIES ECONOMIC ANALYSIS CONCLUSION REFERENCES APPENDIXES AKNOWLEDGEMENT 24 1 P a g e

3 1. ABBREVIATIONS AIFM: Alternative Investment Fund Manager BOD: CBC: Board of Directors Central Bank of Cyprus CIPA: Cyprus Investment Promotion Agency CSE: Cyprus Stock Exchange CSSF: Commision de Surveillance du Sectur Financier CySEC: Cyprus Securities & Exchange Commission ECB: European Central Bank EFAMA: European Fund and Asset Management Association EMU: EU: European Monetary Union European Union FCMC: Latvia s Financial and Capital Market Commission FMA: Financial Market Authority FSA: Financial Services Authority MIF: Monetary Financial Institution MiFID: Markets in Financial Instruments Directive MFSA: Malta Financial Services Authority ICIS: International Collective Investment Scheme IF: Investment Fund IIC: International Investment Company UCITS: Undertakings for Collective Investment in Transferable Securities 2 P a g e

4 2. ABSTRACT Part of our job in the 2012 Erasmus Intensive Program was to make an extended research and study, to provide an economic analysis of non-ucits in Europe and especially in Cyprus. Firstly, we will introduce the two types of fund structures. Secondly, we will give a brief delineation of Ucits and subsequent will be focused on non-ucits. At this part of the discussion we will indicate the legal and regulatory framework of these schemes in our island. Moreover we will determine the structure of funds and what is implemented about the investment requirements, licensing and transparency. Thirdly, we will provide data about the trends in Cyprus and provide a comparison of non-ucits among the five European Countries which are participate in the Program. Also, we will mention the differences between Ucits and non-ucits. At the end of this discussion, we will make an economic analysis, concluding with the reasons why to choose Cyprus as fund Domicile. 3 P a g e

5 3. INTRODUCTION Investment funds are investment vehicles created for the purpose of collecting assets from investors and channeling those assets into a portfolio of financial instruments such as stocks, bonds and other securities. Investment funds offer small investors the chance to have a professionally managed and diversified basket of financial instruments at affordable costs 1. The accession of EU on May 1, 2004 has launched a new era of opportunities and responsibilities for Cyprus. With the dawn of 2008, Cyprus joined the EMU leveraging a robust economic performance marked by banner key indicators. Apart from achieving and maintaining the indicators to meet the strict EMU entrance requirements, a key advantage of joining the euro zone is price transparency, with exchange rate risk eliminated and costs significantly lower, prices are transparent across the Euro zone, fostering competition and lower prices in the medium to longer term. Accession to the EU has also launched a new era of commitment to investment growth in Cyprus. The two main types of fund that are structured in Cyprus are the Undertakings for Collective Investment in Transferable Securities and the International Collective Investment Schemes. Until now the island is specialized mostly with the ICIS schemes but as it is highlighted in the country s Strategic Development Plan , regulators want to encourage Foreign Direct Investment opportunities in both types. 1 REFERENCE 1: Alfred Sarkissian, P a g e

6 4. UNDERTAKINGS FOR COLLECTIVE INVESTMENTS IN TRANSFERABLE SECURITIES The open ended Undertakings for Collective Investment in Transferable Securities 2 are investment funds created with the sole purpose of gathering investors capital (publicly collected capital), and investing that capital in transferable securities via stock markets, banking deposits and any other investments and whose operation is based on the principle risk of diversification and whose units can be liquidated by the unit holder on request using the assets of the fund. UCITS are governed by the EU Directive 85/611/EC. The European Directive sets out the registration procedure requirements for UCITS and how they can offer their services in the EU via the Single Passport Mechanism. The new UCITS IV Directive which adopted in every country in the EU since July, 2011 it provides many advantages against the previous directives. These funds can be freely marketed across all countries that are a part of the European Union, provided that the fund and fund managers are registered within the domestic country. The regulation recognizes that each country within the EU may differ on their specific disclosure requirements. The UCITS law 200(I) 2004 provides the legal framework for the registration, regulation and marketing of local and foreign funds in Cyprus. As discussed above the following are not considered to be UCITS under the law: UCITS which are not open ended UCITS that do not market to the public in Cyprus or other EU member states UCITS that based on their fund rule or constitutional documents only make their units available to the public in other countries except Cyprus UCITS for which due to their investment and borrowing policy the rules of the law 225(I) 2002 are not suitable Under this law, local UCITS may take the following legal forms: Mutual Funds Variable Capital Investment Companies Until now we have only 50 Ucits funds which are licensed in Cyprus from foreign investors. 2 REFERENCE 2: Cyprus Securities and Exchange Commission/Ucits Law 5 P a g e

7 5. INTERNATIONAL COLLECTIVE INVESTMENT SCHEMES The main objective of an ICIS is the collective investment of funds of unitholders 3. At the option of unitholders, the units of an ICIS may be redeemed or repurchased directly out of the assets of the ICIS unless the Law provides otherwise. It consists of a relatively safe investment opportunity since it has a specific objective, projected target return and risk profile, which must be set out in the Offering Memorandum. The investments of the fund are made by specialized management and can consist of securities, bonds, and other financial instruments. It accumulated funds, of high net worth in a collective scheme, which is flexible, with minimum regulatory supervision. Cyprus introduced in May 1999, the ICIS Law (No. 47(I)), enabling the establishment and regulation of ICISs. It was not until recently, were changes in the Cyprus tax legislation took place aimed at favoring the use and increasing the attractiveness of such funds. The CBC has been designed under the Law as the competent authority with the responsibility for the recognition, regulation and supervision of ICISs. The CBC is also the supervisory for the managers and trustees of ICISs. Under the Law, the CBC may issue regulations covering investment restrictions, directions and codes of conduct for ICISs, managers and trustees. Despite the fact that the provisions of the ICIS Law of 1999, allow the designation of three types of ICIS: An ICIS marketed to the general public An ICIS marketed solely to experience investors 4 A private ICIS The CBC s policy accepts applications only for Private ICIS Non Ucits. The reason is because public funds are authorized by the CySec as UCITS. The ICIS marketed solely to experience investors is merged with the private ICIS. An ICIS may take one of the following forms: International Fixed Capital Company International Variable Capital Company International Unit Trust Scheme International Investment Limited Partnership 3 APPENDIX 1 4 APPENDIX 2 6 P a g e

8 5.1 PRIVATE ICIS = NON-UCITS 5 A private ICIS means a scheme which restricts the right to transfer its units and limits the number of its unitholders to one hundred experience investors (with or without voting power). A private ICIS is prohibited from making any invitation in any part of the world to the public to purchase units in the scheme. Each investor should have at least Euro available for the investment. Until now the regulatory and supervisory authority is the CBC. In the upcoming future the CySec will supervised the ICISs (in April 2013). The CBC regards a private ICIS as a private arrangement, and therefore because it needs less regulation it is not obliged to appoint a manager or a trustee. Also, a private ICIS does not have a minimum subscription requirement. The CBC without the adoption of a directive accepts only ICIS which are consisting by experience investors. By law, CBC is not responsible about the feature of an ICIS or the losses of the investors, and that is why there are no limitations about where and how much the fund is going to invest. However, CBC approves ICIS by testing if the fund and the responsible parties are fit & proper, and recognizes ICIS if the scopes of the investors are achievable. In that way, with the knowledge of the CBC licensing department, there is a safeguard for the investors. The recognition of an ICIS shall not constitute a warranty by the CBC as to the performance of the scheme and the CBC shall not be liable for the said performance or any omissions or malpractice by the scheme, its manager, trustee or directors. It must be noted that the CBC has adequate powers under the Law to protect investors interest, including but not limited to revoking an ICIS s recognition, freezing the assets of an ICIS, or stopping the use of an offering memorandum which is not considered appropriate. The CBC may also apply to the Court in order to appoint an inspector to investigate the affairs of the ICIS, its manager or trustee and where the Court considers necessary, the affairs of any associated undertakings of any of the aforementioned. The existing regulatory framework is based on the 47(I)/1999 and 2000 ICIS Law, Cyprus Companies Law, Business Names Law and the International Trust Law. From April of 2013 the new directive 6 on Alternative Investment Fund Managers will be transposed into Cyprus law, replacing the existing national law. The purpose of the directive is to regulate both managers and funds, but with a gravity on managers. In accordance to the directive, only AIFMs which are established in the EU will be able to provide their services among European investors. Once a manager is authorized by the regulator of the EU member state, he can sell his funds throughout the EU. The new Directive will regulate all alternative investment managers in EU who are currently not covered by EU law. An exempt from the directive will be AIFMs who manage less than 100 million of assets. The threshold is raised to 500 million for private equity. Furthermore managers who are below the threshold may voluntarily opt in to the Directive to take advantage of the passporting provision. But if so, they will have to compliance with all the rules of the Directive. In addition, the Directive proposes to regulate certain investment strategies 5 For Cyprus 6 REFERENCE 3: Open Europe, The EU s AIFM Directive, September P a g e

9 and techniques that managers employ. The following graph 7 summarizes the key provisions of the directive at a glance: 1. AUTHORIZATION 2. MARKETING 3. CONDUCT OF BUSINESS 4. FUNCTION AND SERVICES PROVIDERS 5. TRASPARENCY Scope Authorization requirements Capital requirements EU AIFM vs Non-EU AIFM: EU AIF Non-EU AIF EU Passport Remuneration quidelines Rules of conduct Conflict of interest Valuation requirements Risk and liquidity management Depositary: Eligit entities Depositary obligations Depositary stability Detegation and sub-delegetaion (EU/non-EU entities) Reporting to regulator Disclosure to investors 6. SPECIFIC PROVISIONS Requirements on leverage Requirements on acquisition of significant interests Feeders and funds of funds (FoFs) 7 REFERENCE 4: Michael Hornsby, August P a g e

10 In order to establish an ICIS the prior approval of the CBC has to be obtained. The CBC must be provide with such information so as to be satisfied as to the competence of the directors, promoters, managers or trustees and their probity is such as to render them suitable to act in their respective capacities. The interested parties who want to set up funds have to make the following obligatory appointments. Firstly, they must appoint directors. Their responsibility is to manage the fund. The Directors must be at least two executives, who need to be equally experience and qualified, so they will inspect each other job and qualifying to the Fit and Proper test 8. Secondly, an Investor manager 9 of the fund must be appointed and he is responsible for the managing of the fund as a whole and implements the investment strategy of the fund. It is not required to be based in Cyprus. The manager is liable about his actions and for that reason he must report every month the BOD of the fund about his decisions. Also, a private fund must appoint a licensed and well recognized bank acting as a custodian undertaking the following: Safe keeping of the assets and titles of the fund Responsible for checking compliance with investment objects of the fund Opening of bank accounts and undertaking the transfers of the money by the investors to the fund. Another obligation is to appoint an Administrator which can be a bank, an Investment Firm or a company located in Cyprus with expertise and qualified staff. The responsibilities of an administrator are to maintain the bookkeeping of the fund, to prepare the calculations of the Net Asset Value and to communicate with the managers for any information. In addition, the following should be designated and their offices must be located in Cyprus: the external auditor, the legal advisors and the money laundering compliance officer. If CBC is satisfied that the directors have the knowledge and experience, it is not obligatory for the fund to appoint a trustee. The trustee of a scheme is whom the property has been vested in accordance with the terms of a trust deed or trust agreement. 8 APPENDIX 3 9 APPENDIX 4 9 P a g e

11 The process which the interested parties should follow to establish an ICIS is (it may take at most 2 months): 1 Submit the application and the application fee to CBC 2 Review of the application by CBC and take the approval 3 Registration of ICIS to the Department of Registrar of Companies 4 Issue of Certification of recognition by CBC The following list shows the applications and documentation that need to submit to CBC in order to obtain the relevant license: Standard Application Form Offering Memorandum of the Fund Personal Questionnaires completed Questionnaire for Legal Persons Agreements (Management, Custodian, Administrator) Drafts Prospectus Reference letters Reviews Application Summary Copies of any material contracts Even though CBC is not responsible and liable for the results of the operations of an ICIS, it is obligatory by the Scheme to report to CBC the following in order to provide transparency to all unit-holders: Annual audited report for each financial year within three months from the end of the financial year Half-yearly report, every June, within two months from the end of the half year Six Monthly Balance Sheet Return every June and December within 15 Days of the end of the reporting period Yearly Profit and Loss every December within 15 Days of the end of the reporting period Quarterly Information Return on Net Asset Value at the end of every quarter within 15 Days of the end of the reporting period. 10 P a g e

12 5.2 LEGAL FORMS OF PRIVATE ICISs There are four types of legal forms of private ICISs. The CBC accepts written application by or on behalf of companies which have been incorporated in the Republic, wishing to be recognized as either IFCC or as IVCC. The other two types are IUTS and IILP which are not International Investment Companies like the other two. International Fixed Capital Company Incorporated under the companies Law and recognized to operate as an IFCC pursuant to the ICIS Law. The share capital cannot vary, it remains fixed. An IFCC shall have such minimum issued and fully paid up share capital as may be prescribed by the CBC and may be denominated in any currency approved by the CBC. IFCC are exempt from the requirement of having a minimum capital. The investors cannot redeem or subscribe at any time. Also, there are a specific number of units to issue. The units of the company are or are expected to be listed on a Stock Exchange and the CBC considers that its units are or are expected to be actively traded on that Stock Exchange. International Variable Capital Company Incorporated under the Companies Law and operates as in IVCC under the ICIS Law. The share capital varies according to the participating investors at any given time. In an IVCC the investors can redeem or subscribe at any time. The amount of the share capital of the company shall be equal to the Net Asset Value of the shares of the company at any time in issuance. The units of the company are or are expected to be listed on a Stock Exchange and the CBC considers that its units are or are expected to be actively traded on that Stock Exchange. 11 P a g e

13 International Unit Trust Scheme An international trust created under the International Trust Law and recognized to operate as an IUTS under the ICIS Law. An application for the recognition of an IUTS must be submitted to the CBC by the trustee of an international trust created under the International Trust Law. The assets are owned by the Schemes Trust 10 in fiduciary for the trust beneficiaries. International Investment Limited Partnership A limited partnership registered under the Partnerships Law and recognized to operate as an IILP under the ICIS Law. An application for a recognition as an IILP must be submitted to CBC be the general partner 11 of a limited partnership registered in Cyprus in accordance with the Partnership and Business Names Law. This type of ICIS is related with shares and not units. The management shares shall not be transferred, sold, assigned, charged, mortgaged, pledged or otherwise encumbered or disposed of, except with the prior written consent of the CBC. 10 APPENDIX 5 11 APPENDIX 6 12 P a g e

14 5.3 TRENDS IN CYPRUS 12 According to the following graph, International Variable Capital Company is the most commonly used ICIS form in Cyprus. This is because this type of ICIS enables the unitholders, the manager and the director of the fund to be more flexible and to adopt the fund to the current micro and macroeconomic situations and data of the field that is going to be involved in. IFCC IVCC IUTS IILP The following graph shows the demand of ICIS in Cyprus from 2000 until the first quarter of We observe a big boom of demand about the International Variable Capital Company schemes from mid 2009 until the first quarter of 2011 where the economic crisis began to affect the island's economy. The other three schemes show constant fluctuation through the years YEAR OF RECOGNITION IFCC IVCC IUTS IILP 12 REFERENCE 5 13 P a g e

15 Due to the fact that IVCC is the largest and most attractive ICIS in Cyprus, we made a research about the main objectives of these schemes, which are represented in the following graph. Trends show that the investors who require an establishment of an IVCC have the following purposes: MAIN OBJECTIVES OF IVCCs Private & publicly quoted companies Solar projects Investments in gold Pharmacentrical area Convertible Bonds Market Property Freight Derivatives Foreign Currencies Exchange Trading and index funds Real Estate Assets Reneable Energy Industries Equity, Hedge funds and debt instruments Private and Public Securities Capital appreciation & diversification of investment P a g e

16 6. UCITS VS NON-UCITS IN CYPRUS From the table 13 below are clearly mentioned most of the differences between Ucits and Non-Ucits funds in Cyprus. The main differences between them, relate to the way in which the funds are marketed to investors and the proposed investment policies of the funds. Until now the responsible authority for Ucits is CySEC which uses the new UCITS IV Directive and for Non-Ucits is CBC which uses the 47(I)/1999 Law. In short terms plans, we are expecting the finalization and approval by the House of Representatives the new fully transportation of the AIFM Directive into National Law (deadline 22/07/2013). Since Non-Ucits funds are established pursuant to domestic law in contrast with Ucits which follow the EU law, they do not have a passport for sale in other EU Member States. It follows, therefore, that the CBC has more flexibility regarding the imposition or relaxation of conditions generally. Due the flexibility, Non-Ucits Investment Funds are characterized as riskier than Ucits Funds. The potential hazard in a non-ucits fund will affect only private investors but in an Ucit fund it will affect the investors from the general public, that s why Ucits are more supervise. Investors of Ucits could be anyone, instead of Non-Ucits were the unit-holders must be experienced and qualified. Also for Non-Ucits there is a restriction in the number of them to 100. For Ucits there are no restrictions on transferability under the Ucits Law but for Non-Ucits there is the restriction in the right to transfer the units in the scheme and it s prohibited to invite the public to purchase the shares of the scheme. Moreover, in contrast with Ucits Funds, in the Non-Ucits funds where the regulation needs are low there is no obligation to appoint a manager if and only if the CBC is satisfied that the directors have the knowledge and experience. Each type of scheme can either be of limited or unlimited duration with the structure to be decided by the applicants provided that adequate protection will be offered to the investors. 13 REFERENCE 6 15 P a g e

17 UCITS NON-UCITS DIRECTIVE UCITS IV Law, 47(I)/1999 From April AIFM SET UP IN ACCORDANCE WITH UCITS directive Specific national laws EUROPEAN PASSPORT FOR SALE IN OTHER EU Member YES NO States LEVEL OF INVESTOR PROTECTION HIGH Under LAW LICENSING CySec CBC INVESTMENT POLICY/STRATEGY Harmonized with European Not harmonized with European Directive Directive. More Flexible. INVESTMENT Securities, available liquids Also, private equity, real estate and other high risk assets PRECONDITIONS FOR OPERATION Appointment of manager and trustee No requirement to appoint manager or a trustee REGULATORY AND SUPERVISORY AUTHORITY CySec CBC PROMOTED BY CSE and CIPA CSE and CIPA TRANSPARENCY/REPORTING Annual, semi - annual and quarterly reports Annual and half year reports DURATION Limited or Unlimited Limited or Unlimited OPERATIONAL COSTS HIGHER LOWER SET UP COSTS HIGHER LOWER TAX INCENTIVES Exemptions Exemptions TIME TO MARKET 6 months 2 months PROHIBITED FROM ISSUING BEARER UNITS APPROVAL OF CBC YES APPLICATION FEE EUR EUR 400 ANNUAL SUPERVISORY FEE EUR EUR 400 SCHEME TYPE Single or Umbrella Single INVESTORS/UNIT-HOLDERS General Public Private-Experience MAX INVESTORS No limit 100 MINIMUM CAPITAL EUR PROHIBITED THE INVITATION TO THE PUBLIC FOR PURCHASE NO YES OF ITS SHARES RESTRICTIONS IN THE RIGHT TO TRANSFER ITS UNITS IN THE SCHEME NO YES 16 P a g e

18 7. COMPARISON OF NON - UCITS AMONG EUROPEAN COUNTRIES 14 The table below shows a brief comparison between the 5 participating countries. CYPRUS MALTA LATVIA LUXEMBURG LIECHTENSTEIN REGULATORY AND SUPERVISORY AUTHORITY TIME TO MARKET APPLICATION FEE ANNUAL SUPERVISORY FEE CORPORATE TAX RATE TYPES OF FUND VEHICLE EXEPT FROM UCITS MINIMUM CAPITAL REQUIREMENT FULLY TRANSPOSED OF THE AIFM DIRECTIVE INTO NATIONAL LAW CBC MFSA FCMC CSSF 2 weeks weeks for retail CISs And 1 week for Professional Investor Funds to to FMA 3 months 2 weeks 8 weeks, or more 6 weeks Non 2,650 to 5,000. 8,326 2,650 to 5,000 1,665 10% 35% 15% 29.63% 12.5% IFCC, IVCC, IUTS, IILP NOT YET On April 2013 Retail Collective Investment Schemes and Professional Investor Funds Only For Self- Managed funds NOT YET On 22/07/2013 Non Ucits UCI, SIF Non Ucits NOT YET On 22/07/2013 NOT YET On April 2013 NOT YET On 22/07/ REFERENCE 7 17 P a g e

19 CYPRUS: Cyprus provides wide choice of vehicles (IFCC, IVCC, IUTS, and IILP) to establish with the lowest setup and maintenance fees compared to the traditional EU jurisdictions. In addition, Cyprus is ranked first among the European countries for the low corporation taxes and for the favorable provisions of the 43 double tax treaties. MALTA: Malta s financial services industry is now one of the EU s fastest growing fund domiciles. This growth is driven by an attractive tax regime for funds and advantageous tax treatment for highly qualified expatriate staff working in the industry, (up to 25% tax refund). LATVIA: Latvia s corporate income tax rate is among the lowest in Europe at a flat rate of 15%. LUXEMBURG: Luxembourg was the first EU Member State to transpose the UCITS IV Directive into national law, advantaging the time priority against the other countries. At the same time, the Luxembourg government introduced new income tax measures that should increase Luxembourg s attractiveness as a center for cross-border fund administration, distribution and management. LIECHTENSTEIN: The Liechtenstein fund center is a young market that has grown successively in recent years. As with Cyprus and Latvia, Liechtenstein benefits in comparison from the other European countries for the low corporation tax. It is also a country with short time to market so investors benefit from that. Moreover, Liechtenstein is the first country which transferred the AIFMD into a national law draft. 18 P a g e

20 8. ECONOMIC ANALYSIS The interest for Ucits and alternative Ucits Funds grows with time (the continued strength of interest is evident from the releases of EFAMA 15 ). More and more investors are using alternative strategies among their investments in order to provide better portfolio diversification during adverse market conditions as well as potentially boosting risk-adjusted returns over the long term. Investors seek profitability, liquidation and transparency exposure among their investment strategies. Grounds of the recent financial crisis, a high number of fraud cases, specific instances of fund blow ups, lack of transparency and protection, led many investors in the direction of regulated funds. Investor demand for governed fund products seems to be one of the key factors why Non-Ucits are now receiving significant interest. Even though Non-Ucits do not have the benefit of the cross border EU passport are recognized worldwide as a robust, well attracting investment from a wide range of jurisdictions outside the EU. Non-Ucits are primarily for promotion on a private placement basis in contrast with Ucits which are general public, but they still carry significant marketing appeal and are subject to the same Cyprus tax treatment as with Ucits. Recent changes in the Cyprus tax legislation and regulatory framework bear testimony to the Cypriot government s commitment in aligning Cyprus with what the professionals in the private sector have sought for years, that is to say placing of Cyprus on the world map of fund friendly jurisdictions. In the upcoming future we are expecting the admission of the fully transportation of the AIFM Directive into National Law. Even thought, the AIFM Directive is completed and we are awaiting the approval by the competent bodies in Cyprus, we do not know what the new Directive includes. We look forward for a comprehensive and effective framework, harmonized with the conditions prevailing in Cyprus. We guess that the responsible parties took into account the advantages of the investment environment in Cyprus and created a directive which will be attractive for the investors around the world. The economy of Cyprus is largely based on investments established in the island. A Directive which will provide not only safety, transparency, flexible procedures for the licensing and supervision but also it would be competitive among the other countries, it will provide the investors a new fund domicile and put Cyprus into the most friendly jurisdictions. 15 APPENDIX 7 19 P a g e

21 9. CONCLUSION Investment funds are one of the up and coming sectors within the Cyprus financial services industry. Cyprus is the ideal location, placed among three continents (Europe, Asia, Africa), which makes our country attractive to many foreign investors. Today as an EU and Euro zone member, Cyprus' investment fund industry has the potential to become a key component in the island's economy and turn Cyprus into an international investment fund center. In our believe Cyprus has many competitive advantages and offers simple and concise procedures for the management of funds such as Ucits and ICIS. The safe, modern and flexible regulatory environment, low operating costs, extensive infrastructure in financial services, the high level of professional services such as banking, consultancy and audit, along with the competitive tax system and the 43 double taxation treaties with other countries, make Cyprus the rising star of the European Financial Services sector 16. Cyprus investment vehicle is suitable both for EU inbound and outbound investments. There are no investment activities that are inappropriate for the Cyprus tax environment. The tax and regulatory synergies are now in place to attract not only the funds themselves but also fund managers and fund investors. In a globalized economy where multinational funds are pressed to meet increasingly higher expectations, Cyprus provides a complete value proposition. 16 APPENDIX 8 20 P a g e

22 10. REFERENCES 1. Alfred Sarkissian, 2012: What is the definition of Investment Funds, ehow [online]. Available at: < [Accessed on June 2012]. 2. Cyprus Securities and Exchange Commission. The information according UCITS was taken from the Ucits Law. [Online]. Available at: < > [Accessed on June 2012]. 3. Mat Persson, September 2009: The EU s AIFM Directive: Likely impact and best way forward. [Online]. Available at: < > [Accessed on July 2012]. 4. Michael Hornsby, August 2010: AIFM driving structural change, Ernst & Young [online]. Table is designed based on the graph of the following website: < [Accessed on June 2012]. 5. Central Bank of Cyprus, 29/March/2012, Registry of ICIS. Charts are designed by us, based on information provided from the website of CBC and specifically from < [Accessed on June 2012]. 6. Created by us based on the websites of: Available at: CBC: < > Licensing & Supervision: < > List of ICISs which have been recognized by the CBC: < > Guide to prospective applicants on obtaining recognition as an ICIS: < > CySEC: < > [Accessed on June 2012]. 21 P a g e

23 7. The preparation of the table and the analysis was made with the help of the Authorities of each Country and the respectively websites: Malta: MFSA: < Latvia: FCMC: < > Luxemburg: CSSF: < Liechtenstein: FMA: < > The following questions send by to each Authority on 6/July/2012: Which are the types of Non-Ucits? What is the time to market? Application and Annual supervisory fee? Minimum Capital Requirements? Date of transportation of AIFM Directive into national law? The reasons why investors prefer your country as fund domicile? The s respond to us are: Malta: Latvia: Luxembourg: Liechtenstein: 8. Except from the websites above which are used not only for the specific reference but for the whole project there are also some additional websites: CIPA: < > EFAMA: < The Hedge Fund Journal: < > 22 P a g e

24 11. APPENDIXES 1. UNITHOLDER: Is the owner of units (share, participation or interest in a scheme) of an ICIS and may be an ICIS, an international business company or a person not being a permanent resident of Cyprus for the purposes of the Exchange Control Law. 2. EXPERIENCE INVESTOR: A person(whether legal or natural) who itself provides financial services to the public or a person (whether legal or natural)who frequently enters into investment transactions which, on average, are of substantial size and such person, having regard to all relevant facts, can reasonably be expected to appreciate the risks inherent in. investment transactions. 3. FIT AND PROPER TEST: In determining whether a person is fit and proper, the CBC takes into account relevant education and professional qualifications, experience, reputation and capital resources available to it. 4. INVESTOR MANAGER: A manager can be a physical person or a company (licensed investment company). 5. SCHEME TRUST: Usually a bank, liable to beneficial owners on the value of their shares. 6. GENERAL PARTNER: Natural or legal person. Is like the investor manager who appointed in the other kind of schemes. He is also a member of the scheme. 7. EFAMA: Is the representative association for the European investment management industry. EFAMA represents through its 27 member associations and 59 corporate members about EUR 14 trillion in assets under management of which EUR 7.9 trillion managed by investment funds at end March VOTES OF CONFIDENCE: Cyprus is ranked among the High Potential - High Performers for FDI growth for (UNCTAD). In , Cyprus ranks 47th among 142 economies compared to the previous year, where ranked 40th among 139 economies (World Economic Forum, Competitiveness Index, ). 23 P a g e

25 12. ACKNOWLEDGEMENT PERSONAL MEETING: Many thanks to Ms Chrystalla Kenne from CBC who discussed with us all about Non-Ucits in Cyprus. A big part of our project, especially the one of Private ICISs, is derived from that discussion. 24 P a g e