Cyprus Funds. Presented by: Andreas Yiasemides Partner K. Treppides & Co Director Treppides Fund Services

Transcription

1 Cyprus Funds Presented by: Andreas Yiasemides Partner K. Treppides & Co Director Treppides Fund Services

2 CYPRUS AS BUSINESS DESTINATION FOR FUNDS Fund specific attributes Experience in Investment Funds and Asset Management sectors (ICIS law, CIFs) Efficient, effective and approachable Regulator (The Cyprus Securities and Exchange Commission - CySEC) CIFA observer of EFAMA Cost effective jurisdiction with simple procedures for setup, management and operation of funds European passport for Funds and Fund Managers 2

3 CYPRUS FUNDS SECTOR Assets under Management: 3,2 billion Euro (June 2014) Number of Funds: Over 100 UCITS: 3 (two single schemes and one umbrella-type with 14 sub-funds with 46,4 million of assets under management) UCITS Management Companies: 2 AIFMs: 2 Custodian banks: 3 3

4 CYPRUS INVESTMENT FUNDS ASSOCIATION (CIFA) CIFA is the Association of professionals and organizations which are involved in the Investment Funds Sector in Cyprus. Established in February 2013 with the mission to: Help its members capitalize on industry trends Shape regulation Enhance professionalism, integrity and quality Promote the Cyprus Investment Funds Industry Close cooperation with the Government, the Regulator and Industry Associations and Professional Bodies Steps to become a national member of widely recognized and respected international bodies 4

5 CYPRUS INVESTMENT FUNDS ASSOCIATION (CIFA) CIFA enlists King Wood Mallesons (KWM) to promote Cyprus investment funds. KWM conducted a comprehensive review of the Cypriot investment funds framework, including corporate tax arrangements and registration laws, in order to enhance Cyprus position as an international jurisdiction for the domiciliation and management of funds. KWM will work with CIFA to promote Cyprus as a gateway to Europe for regional fund managers, particularly in Asia. 5

6 AIFs Framework The Alternative Investment Fund Law N.131(I) 2014 came into force on the 27 th of July The Cyprus Securities and Exchange Commission (CySEC) is the regulatory authority responsible for the overseeing of Alternative Investment Funds. The content of this slide forms part of the presentation/report as a whole, its validity shall not be severed from the rest of this document and Treppides Fund Services Ltd accepts no liability for any loss or damage suffered by any person as a result of placing any reliance on the contents of this slide or the presentation as whole. 6

7 Legal form of AIFS An AIF can take the following legal forms: Fixed Capital Investment Company ( FCIC ) Variable Capital Investment Company ( VCIC ) Limited Partnership ( LP ), and Common Fund ( CF ) 7

8 Fixed/Variable Capital Investment Company ( FCIC/VCIC ) General Characteristics: Separated Legal Entity with Form of a Limited Liability Company Variable or Fixed Capital Managed either externally or internally (under conditions) Under AIF and Companies Law In the case of an AIF/AIFM, the company is also under the AIFM Law, which prevails against the above Laws Registered office located in Cyprus 8

9 Limited Partnership ( LP ) General Characteristics Separate Legal Entity with Form of a Limited Partnership Managed by General Partner Under AIF and Limited Partnership Law Registered office located in Cyprus General Partner Management and representation of the partnership Responsible for all the debts and responsibilities of the partnership Sole representative of the Fund and partners Can act as an external manager 9

10 Common Fund ( CF ) General Characteristics The fund s portfolio is handled mandatory by an External Manager External Manager is the sole representative of the Fund and Unit holders No separate legal personality, attached to the External Manager Reliable only for the actions related to it, no legal obligation in relation to the External Manager s other actions Is licensed to work as a mutual fund according to the Law 10

11 Types of AIFS Alternative Investment Fund with Unlimited Number of Persons: May be marketed either to professional and/or well-informed or retail investors Have investor shares which are freely transferable May be listed, and in the case of AIF with the legal structure of a VCIC or FCIC and if marketed to Retail investors, may be traded Are subject to minimum capital requirements equal to EUR or EUR in the case of an AIF/AIFM Are subject to certain investment restrictions for the purpose of risk spreading and ensuring liquidity 11

12 Types of AIFS Alternative Investment Fund with Limited Number of Persons: May not exceed the total number of 75 investors May be marketed to professional and/or wellinformed investors Are not externally managed by an AIFM authorised manager and/or their assets under management do not exceed the AIFMD thresholds, being (i) EUR 100mm (incl. leverage) or (ii) EUR 500mm Have investor shares which are freely transferable only if their transfer does not result in the AIF having more than 75 investors 12

13 Typical Structure The Cyprus AIF INVESTORS Fund manager FUND DEPOSITARY FUND ADMINISTRATION AIF FUND INVESTMENT COMMITTEE FUND BOARD OF DIRECTORS AUDITOR SPV 1 SPV 2 SPV 3 DIRECT INVESTMENT INVESTMENT 1 EU INVESTMENT 1 NON-EU INVESTMENT 2 EU INVESTMENT 2 NON-EU INVESTMENT 3 EU INVESTMENT 3 NON-EU 13

14 Investor Classification Three classifications of investors: (i) (i) Professional Investor A Professional Client, as such term is defined in the MiFID Well-informed Investor An Investor that is not a Professional Client and meets the following two requirements: i. Confirms in writing that he/she is a qualified investor and that he/she is aware of the risks involved with an investment in the relevant AIF; and ii. (1) Investment made in AIF is at least EUR OR (2) Expertise, experience and knowledge in evaluating an investment opportunity properly, have been certified by a licensed bank/credit institution, an authorised investment firm or an authorised Management Company (ii) Retail Investor An investor which does not meet the requirements above. 14

15 Five Key Benefits The Cyprus AIF Flexibility: Any asset can be included in the investment strategy of the AIF (under certain conditions) Transparency: Annual audited and half yearly reports to be sent to the CySEC and the investors (contain financial statements, information on borrowing, portfolio information, NAV) Tax Incentives: Cyprus AIF benefit from significant tax incentives / Establishment for taxation purposes can very difficulty be challenged Regulation: EU directives / business friendly jurisdiction (no onerous reporting requirements) Low set-up and operational costs: Easy and cost efficient to set up and maintain Cyprus funds. 15

16 The Cyprus AIF Tax Incentives No subscription tax on the net assets of the Fund 12,5% flat corporation tax on annual net profits earned worldwide Effective 12,5% tax on interest received The following income is exempted from tax: Profits from the sale of shares and other instruments Dividends received Capital gains arising from sale of immovable property located outside Cyprus Capital gains arising from the disposal of shares/units by the holders A network of Double Tax treaties in place with more than 50 countries worldwide Possibility of exemption from VAT Tax incentives for Fund Managers 50% exemption of income earned for a ten year period from the date of first employment in Cyprus, if salary is over EUR

17 Professionals involved Types of Professionals Depositary Administrator Auditor Investment Manager 17

18 Management of Alternative Investment Fund In the case of an Alternative Investment Fund with Unlimited Number of Persons, a Variable Capital Company and Fixed Capital Company can be managed either internally (self-managed) or externally (appoint an external manager). However it is mandatory for a Common Fund to have an external manager. A Limited Partnership s external manager is the General Partner. An external manager must fulfill the following licensing requirements: if coming from an EU Member State, he/she will need to be one of the following: Alternative Investment Fund Manager; Undertaking Collective Investment Transferable Securities (UCITS) Management Company; Cyprus Investment Firm; if coming from a third country, he/she will need to comply with the Alternative Investment Fund Manager Directive rules on third country undertakings. 18

19 Management of Alternative Investment Fund In the case of an AIF with Limited Number of Persons, a Variable Capital Company and Fixed Capital Company can be managed either internally (self-managed) or externally (appoint an external manager). However it is mandatory for an Limited Partnership to have an external manager. The licensing requirements for an external manager depend on the investment objectives: if the Alternative Investment Fund will invest in financial instruments, then: if established in an EU Member State, he/she will need to be one of the following: Undertaking Collective Investment Transferable Securities (UCITS) Management Company; or Cyprus Investment Firm; or if established in a third country, he/she will need to grant permission for managing the specific Alternative Investment Fund and have adequate regulation and supervision in its home state; or if the Alternative Investment Fund will invest exclusively in other types of assets (eg. real estate, shipping, energy, etc.), the externally appointed manager may be a company incorporated solely for the purpose of managing the specific Alternative Investment Fund whose suitability is deemed by the Cyprus Securities and Exchange Commission. 19

20 Depositary Professionals involved A depositary must be appointed which has a registered office in the Republic or in the EU or a third country with the condition that CySEC has a written agreement of cooperation with that country Alternative Investment Fund with Limited Number of Persons is allowed not to appoint a depositary if: Assets do not exceed euro If the incorporation documents or partnership agreement restrict the number of shareholders to 5 persons Assets are not held under custody (e.g real estate) 20

21 Professionals involved Depositary Duties Cash Monitoring: The AIF depositary shall in general ensure that the AIF s cash flows are properly monitored and shall, in particular ensure that: (a) all payments made by or on behalf of investors upon the subscription of units of an AIF have been received, (b) all cash of the AIF has been booked in cash accounts opened in the name of the AIF Segregation of Cash: Where the cash accounts are opened in the name of the depositary acting on behalf of the AIF, no cash of the entity referred to in point (b) above and none of the depositary s own cash shall be booked on such accounts. The content of this slide forms part of the presentation/report as a whole, its validity shall not be severed from the rest of this document and Treppides Fund Services Ltd accepts no liability for any loss or damage suffered by any person as a result of placing any reliance on the contents of this slide or the presentation as whole. 21

22 Professionals involved Depositary Duties Asset Safekeeping: The asset of the AIF or the (External Manager) acting on behalf of the AIF shall be entrusted to the depositary for safe-keeping The depositary shall verify the ownership of the AIF or the (External Manager) acting on behalf of the AIF of such assets and shall maintain a record of those assets for which it is satisfied that the AIF or the (External Manager) acting on behalf of the AIF holds the ownership of such assets The content of this slide forms part of the presentation/report as a whole, its validity shall not be severed from the rest of this document and Treppides Fund Services Ltd accepts no liability for any loss or damage suffered by any person as a result of placing any reliance on the contents of this slide or the presentation as whole. 22

23 Professionals involved Depositary Duties Compliance: In addition to the tasks referred to in points (1) to (3), the depositary shall: (a) ensure that the sale, issue, re-purchase, redemption and cancellation of units of the AIF are carried out in accordance with the applicable national law and the AIF rules or instruments of incorporation (b) ensure that the value of the units or shares of the AIF is calculated in accordance with the applicable national law, the AIF rules or instruments of incorporation and the procedures laid down in the AIFM law; The content of this slide forms part of the presentation/report as a whole, its validity shall not be severed from the rest of this document and Treppides Fund Services Ltd accepts no liability for any loss or damage suffered by any person as a result of placing any reliance on the contents of this slide or the presentation as whole. 23

24 Administrator Professionals involved It will usually provide in respect of the Fund: Accounting Calculation of the Net Asset Value (NAV) Maintenance of the Share Register Performance of procedures required for transfer and redemption of units Reporting to the Regulator and Investors KYC procedures Reconciliation of depositary account Compliance with legislation and Fund provisions. 24

25 Professionals involved Auditor Must be appointed at the incorporation of the scheme. The auditor, who must be a Cypriot based audit firm, needs to be approved by the CySEC. Its duties include: Annual audit of the financial statements based on IFRS Review of the activities and the compliance with the relevant Cyprus laws Carrying out of specific reporting duties for the CySEC. 25

26 Treppides Fund Services Part of K. Treppides & Co Group Member of Cyprus Investment Fund Association (CIFA) and regulated by the Institute of Certified Public Accountants of Cyprus (ICPAC) Our current portfolio comprises the following: Cyprus Funds Other jurisdictions funds such as BVI and Bahamas More than 30 funds and over EUR of Assets under Administration (AUA) Treppides Fund Services Limited undertook the establishment of these Funds from licencing to Administration and day to day Funds requests Our Company holds a Professional Indemnity Insurance to cover potential claims in respect of or in connections to our services 26

27 Our Services Fund Setup and Consultation Services Advice and guidance on the choice of legal form, structure and Fund characteristics Assistance with incorporation/formation of the Fund Domiciliary Services Licensing Support services for AIF Funds Preparation and Submission of the application and all the relevant documents needed to CySEC 27

28 Our Services Fund Setup and Consultation Services (continued) Drafting of the Offering Memorandum and all the relevant documents to complete the application process Assistance with drafting all the legal documents including the Memorandum & Articles of Association Full corporate & domiciliary services for entities used by Funds to invest Treasury and cash/liquidity management Liaison services with the Fund auditors, investment manager, custodian/depositary, regulator, prime broker and other Fund participants 28

29 Our Services Fund Administration Services Investor Subscription, redemption, contributions and withdrawals management and maintenance of the Shareholder Register Monitoring shareholder investment restrictions Investor AML/KYC Compliance FATCA Compliance Investor and regulator Reporting and communication Investment Manager reporting and communication in respect of investor matters Corporate Actions and dividends Disclosure of information services, holding statements and services to the participants of the Provident Fund communication with the participants and investors of the Fund 29

30 Our Services Middle Office Services Trade Capture and recording of trades in the accounting records of the Fund Interaction with Prime Broker and Brokers Interaction with Depositary and Custodian Interaction with Regulator (where applicable) Cash and liquidity Management Portfolio position and cash reconciliations Bank Account Opening and management The content of this slide forms part of the presentation/report as a whole, its validity shall not be severed from the rest of this document and Treppides Fund Services Ltd accepts no liability for any loss or damage suffered by any person as a result of placing any reliance on the contents of this slide or the presentation as whole. 30

31 Our Services Valuation Services Calculation of NAV as prescribed in the Fund Constitutional and Offering Documents Fee and expenses calculations and allocations Fund and Investor P&L allocations for complex structures Processing of corporate actions and allocations of results of profit or loss Tax computation of any tax liabilities or assets The content of this slide forms part of the presentation/report as a whole, its validity shall not be severed from the rest of this document and Treppides Fund Services Ltd accepts no liability for any loss or damage suffered by any person as a result of placing any reliance on the contents of this slide or the presentation as whole. 31

32 Our Services Fund Accounting and Treasury Services Maintenance of the Fund Accounting Ledger Reconciliation of cash and investment positions with the Depositary, Custodian and Broker Preparation of financial statements, including Profit & Loss and Balance Sheet Arranging payments of Fund invoices Liaising and assisting with Fund s audit The content of this slide forms part of the presentation/report as a whole, its validity shall not be severed from the rest of this document and Treppides Fund Services Ltd accepts no liability for any loss or damage suffered by any person as a result of placing any reliance on the contents of this slide or the presentation as whole. 32

33 Our Services Fund Compliance Services Investment restrictions monitoring as per the investment policies of the fund Ongoing monitoring of investors Assistance with Regulatory reporting where applicable Liaising with Fund s legal counsel and Directors on compliance matters Tax Compliance Services for the Fund and its investors Investor KYC & AML The content of this slide forms part of the presentation/report as a whole, its validity shall not be severed from the rest of this document and Treppides Fund Services Ltd accepts no liability for any loss or damage suffered by any person as a result of placing any reliance on the contents of this slide or the presentation as whole. 33

34 Technical Resources Software Prospero Fund Management Software Developed by Sage SA A complete, ready-to-use solution that allows the user to manage and administer unlimited number of funds and unit trusts Automates all operations: Corporate actions Shareholder recordkeeping Fee accruals It ensures compliance with rules and regulations by enforcing due diligence through configurable pre-trade and post-trade checks The content of this slide forms part of the presentation/report as a whole, its validity shall not be severed from the rest of this document and Treppides Fund Services Ltd accepts no liability for any loss or damage suffered by any person as a result of placing any reliance on the contents of this slide or the presentation as whole. 34

35 Technical Resources Software Prospero Fund Management Software (continued) Prospero supports complete fund administration and its main administrative activities are the following: Calculation of the Net asset value including the calculation of the funds income and expense accruals Preparation of semi-annual and annual reports Maintenance of the fund's financial books and records Payment of the funds expenses Reconciliation of daily and monthly Broker Statement Settlement of daily Trades, assuring that the proper dividend and interest are received, updating price of securities of client. Calculation and payment of dividends and distributions Direct Updates of Security prices through Bloomberg Interface The content of this slide forms part of the presentation/report as a whole, its validity shall not be severed from the rest of this document and Treppides Fund Services Ltd accepts no liability for any loss or damage suffered by any person as a result of placing any reliance on the contents of this slide or the presentation as whole. 35

36 Technical Resources Software Prospero Fund Management Software (continued) The software covers the capture of the following asset classes: Prospero Fund functional coverage matrix Cash Funds DCDs Loans IRS Forex Structured Derivatives New Issues IPOs Stocks Bonds CDs FRNs T-Bills Convertibles Commodities Private Equity Funds Hedge Funds Islamic products Real Estate Artwork Direct Investments 36

37 Technical Resources Software Bloomberg Terminal Developed by Bloomberg L.P., which enables access to the Bloomberg Professional service An integrated platform that streams together: price data financials news trading data to more than 250,000 customers worldwide. Through this service professionals and businesses can monitor and analyze real-time financial market data and place trades on an electronic trading platform. 37

38 BENEFITS OF FUND PRESENCE IN CYPRUS Passporting Access to the EU Investor Market More transparency through harmonization and disclosure, hence increased investor protection Expected to enhance the marketing potential of AIF Business Minded Regulator Network of professionals can ensure AIF is always in compliance with the Directive and other legal requirements Lower cost than other EU jurisdictions Strong legal framework in Cyprus 38

39 CFC Possible solution Fiduserve has created an Alternative Investment Fund under the relevant provisions of the legislation in Cyprus. The AIF has taken the form of a Limited Partnership and has been established with the ability to create several sub funds. The fund itself and all the main participants of the Fund (General Partner, Investment Manager, Auditor, Custodian, Fund Administrator) are regulated by various authorities in Cyprus, including the Cyprus Securities and Exchange Commission and the Institute of Certified Public Accountants of Cyprus. A client can restructure an existing corporate structure by becoming a Limited Partner (Investor) in a separate and exclusive Sub Fund, created by exchanging assets for Participation Interests in the Sub Fund, instead of investing in cash. The Net Asset Value of the Sub Fund is calculated frequently and the Limited Partner s investment in the Fund is known and communicated to the Investor at pre agreed intervals. 39

40 CFC Possible solution The active management of the Sub Fund is the responsibility of the General Partner which is a regulated entity controlled by Fiduserve. Certain management function of the General Partner can be delegated to other investment professionals (e.g. a wealth management team already involved with an Investor) but the overall responsibility and control lies with the General Partner in Cyprus. A Limited Partner of a Sub Fund does not by Law have the power to take investment or other decisions relating to the Sub Fund or influence the Investment process in any way. The only decision is to enter or exit the Fund in accordance with the provisions of the Fund s Offering Documents. 40

41 THANK YOU The content of this slide forms part of the presentation/report as a whole, its validity shall not be severed from the rest of this document and K.Treppides & Co Ltd accepts no liability for any loss or damage suffered by any person as a result of placing any reliance on the contents of this slide or the presentation as whole.