Cyprus fund and cse 2014

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CYPRUS: The location of choice for FUNDS

COLLECTIVE INVESTMENT SCHEMES

and Listed on

THE CYPRUS STOCK EXCHANGE


Contents:

1. Collective Investment Schemes

2. Categories of UCITS

3. Collective Portfolio (INVESTMENT FUND) Management

4. Discretionary Portfolio Management On a Client-By Basis

5. Capital requirements

6. Authorisation proxedure

7. Operating conditions

8. Listing on the Cyprus Stock Exchange

9. Categories of Alternative Investments Funds (AIF): 10. Listing on the regulated market: 11. CSE Markets for Listing Collective Investment Schemes:

12. Special Listing Requirements for the Tradable Collective Investment Schemes Market

13. Special Listing Requirements for the Non-Tradable Collective Investment Schemes Market


14. Ways of listing / Annexes related to information to be submitted with the listing application

15. On-going obligations for listed Funds

16. Listing / Annual Fees - Fees for CSE Registry

17. Benefits / Advantages for Licensing and Listing of Funds in Cyprus and on the CSE

18. Advantages provided by the listing on the CSE


1. Collective Investment Schemes:

UCITS: Open-ended Undertakings for Collective Investment in

Transferable Securities (establishment under the Open-Ended Undertakings for Collective Investment (UCI) Law of 2012- N.78(I)/2012)

AIF *: Alternative Investment Funds (Relevant legislation is expected

to be passed shortly by the House of Representatives)

Note: Cyprus Securities and Exchange Commission is the Competent Authority for granting their operation license

* The AIF Law will shortly replace the International Collective Investment

Schemes Law of 1999/ 2000 (where Central Bank is still the competent Authority)

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2. Categories of Undertakings Collective Investments in

Transferable Securities (UCITS):

YCommon Fund (constituted under the Law of contract)

YVariable Capital Investment Company

3. Collective Portfolio (INVESTMENT FUND) Management

The UCITS IV Directive and the AIFMD provide collective portfolio, i.e. investment fund, managers, either of UCITS or of AIFs, with the possibility to passport their fund management and marketing services throughout the EU and to offer both UCITS and AIFs' management and marketing through a single entity (cross-authorisation with cross-reference of documents) by means of passport regime. Such a business concept may prove even more attractive from Cyprus, since it will be combined with Cyprus’ EU lowest corporate tax rate and its cost effectiveness. There are some common features regarding the constitution and functioning of a Cyprus UCITS management company and of a Cyprus manager of AIFs, which are presented below:

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• 125.000 EUR minimum capital requirements

• 2 persons of sufficient repute and experience effectively conducting the applicant’s business

• Internal operations’ manual addressing among other investment decision-making issues, conflicts of interest, internal control and governance issues, the role of committees, client relationship management and complaint handling, risk management, supervision of delegates and valuation issues

• Cross-authorisation via cross-reference of documents

• Provision of MiFID services through passport regime in addition to collective portfolio management

• 10% corporate tax rate

• Delegation of tasks possible (upper limit: Letter-box entity).

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4. Discretionary Portfolio Management On a Client-By-Client

Basis

Asset management companies, providing portfolio management on a client-by-client basis (individual portfolio management), need prior authorisation as Cyprus Investment Firms (CIFs), when providing such service to third parties on a professional basis.

The relevant Law, transposing the EU MiFID Directive (Directive 2004/39/EC) into Cyprus Law, is the Investment Services and Activities and Regulated Markets Law of 2007- Law 144(I)/2007 (the CIF Law). The procedure for obtaining authorisation as a CIF, in order to provide individual portfolio management, consists of the submission of a relevant application and of complying with operating and organisational requirements on an ongoing basis. As an exchange, a CIF is granted passport regime for providing individual portfolio management throughout the EU. Further a CIF can provide portfolio management in third countries, pursuant to approval by the relevant third country regulator. The reason is that regulation pursuant to EU Law, as it is the case with MiFID, is considered to be adequate by many third country regulators, enabling the extension of a CIF’s business also outside the EU.

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5. Capital requirements:

The initial capital for providing individual portfolio management, to be paid upon application submission, must be at least 200.000 EUR, whereas the CIF must have at all times own funds more than or equal to the sum of its capital and never less than

200.1 EUR. A reduction of the issued capital is subject to prior approval by CySEC.

6. Authorisation procedure:

The relevant application form has to be submitted to CySEC in writing and to be signed by the members of the Board of Directors (B.o.D.)

• of the applicant. The members of the B.o.D. of the applicant remain responsible for the accuracy, correctness and completeness of the submitted information

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and documentation by confirming that they have exercised due diligence upon submitting it. The B.o.D. of the applicant must authorise by resolution a specific person or persons to carry out the communication with CySEC during the period of assessment of the application (promoter(s) of the application). The written application to CySEC should include among other information on the internal operations' manual (providing, among other, for the applicant’s computer network and

• electronic infrastructure, for rules governing personal transactions of managers, of employees and of tied agents and for managing conflicts of interest), a business plan, information on the organisational structure as well as information on the identity of qualifying shareholders (persons owning >10%

• of capital or of voting rights directly or indirectly), and the amount of the respective qualifying shareholdings. Further the CIF’s risk management policy and procedures as well as the CIF’s procedures on prevention of money laundering and terrorism financing have to be submitted. Finally a certification by the applicant that it possesses or will possess the funds required for the initial capital has also to be submitted.

• An application charge of 3.000 EUR plus 1.000 EUR for the service of individual portfolio management must be paid. The decision of CySEC must take place

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within 6 months from the submission of a duly completed application.

• A CIF has to be a member of the Investment Compensation Fund for Clients of CIFs (Investor Compensation Scheme).

• The re-domiciliation of an Investment Firm from another EU member state to Cyprus is also possible.

•

• 7. Operating conditions:

• A CIF’s operating conditions will vary depending on the nature, scale and complexity of the CIF’s business.

• The management of a CIF must be effectively conducted by two persons of sufficiently good repute and experience, while one of them has to be Cyprus resident.

• As to the members of the B.o.D., the majority has to be Cyprus residents. The head office of the CIF has to be established in Cyprus and has to be fully fledged with full- time employed personnel, whereas outsourcing is possible. In order for a person employed by a

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• CIF to be able to perform the individual portfolio management function one must have successfully passed the relevant exams provided under the

• CIF Law. The exams are held at least annually and successful candidates are registered in the

• public register held by CySEC. Within four months from the end of the CIF’s financial year, audited financial accounts must be submitted together with a signed copy of the independent auditor’s report. An annual supervision fee must be paid.

8. Listing on the Cyprus Stock Exchange:

YListing with trading on a stock exchange market (regulated market):

•Shares of Variable Capital Investment Company (VCIC)

•Units of Mutual Funds (constituted under the law of contract) which operate as Exchange Traded Funds (ETFs) YListing without trading, on a stock exchange market of Units of Common Funds which are not ETFs

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9. Categories of Alternative Investments Funds (AIF):

YCommon Fund

YVariable or Fixed Capital Investment Company

YInvestment Limited Partnership

10. Listing on the regulated market:

YListing with trading on a regulated market:

• Shares of Variable Capital Investment Company addressed to the general public

• Units of Tradable AIF (ETFs on AIF)

YListing without trading on a stock exchange market units of AIF (except AIF’s with limited number of persons ≤ 75 persons)

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11. CSE Markets for Listing Collective Investment Schemes:

YTradable Collective Investment Schemes Market

YNon-Tradable Collective Investment Schemes Market

Note:

The CSE offers additionally the option for the quoting of Funds’ prices on the CSE website without listing

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12. Special Listing Requirements for the Tradable Collective

Investment Schemes Market:

(a) License from the Competent Authorities of the Country of Origin.

(b) The ETF assets must total at least €200.000. By virtue of its decision, the CSE Council in case of ETF index replication may require a larger minimum amount of assets depending on the composition of the index.

(c) Appointment of at least one Market Maker

(d) The ETF is entitled to sell its units to the public in Cyprus.

(e) Submission of the Registry of Unit holders or Shareholders at the Central Depository Register of the CSE.

(f) The index provider must have granted the ETF issuer, a license to use legally the underlying index in the name of the ETF.

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13. Special Listing Requirements for Non - Tradable Collective

Investment Schemes Market:

(a) License from the Competent Authorities of the Country of Origin.

(b) The common fund’s assets or the variable capital investment company’s assets must total at least €200.000. By virtue of its decision, the CSE Council in case of Collective Investment Schemes index replication may require larger minimum amount of assets depending on the composition of the index.

(c) In case of Collective Investment Scheme, the index provider must have granted the ETF issuer a license to use legally the underlying index in the name of the ETF.

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14. Ways of listing:

Y IPO (Initial Public Offering) and capital raising (Listing securities which have already been issued or shall be issued, a part of which shall be offered through public offering before the commencement of trading).

Y Private placement (Placing securities which shall be issued and allocated prior to the Stock Exchange’s public announcement for listing).

Annexes to be submitted for the listing application:

Y Annex 25: Application of Collective Investment Scheme for initial approval

Y Annex 26: Application of Collective Investment Scheme for final approval / listing

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15. On-going Obligations for listed Funds (CSE Law):

(i) Daily reporting of NAV

(ii) Announcements of any decisions with regards to suspension of fund units’ subscriptions, redemptions or mergers

(iii) Submission and publication of the financial statements (annual and semi-annual reports, quarterly statements)

(iv) Submission and publication of any information with regards to material changes of each fund, i.e. in the content of the Prospectus and the Articles of Association, etc.

16. Listing / Annual Fees:

Listing application fee

YListing on the Tradable Collective Investment Schemes Market

YListing on the Collective Investment Schemes Market (Non-Tradable)

€1.000

€500

Annual subscription Y Single fund €1.000 per fund Y Umbrella/ multi-class fund(s) €1.000 per fund plus

€400 per class/sub-fund

Annual Fee for the publication of prices through the CSE Price Index and electronically through the CSE Website

Y Publication of prices of the fund’s units €250 per fund Y Publication of prices of sub fund’s units (up to

20 sub funds) €170 per sub fund

Y Publication of prices of sub funds (above 20 sub funds) €130 per sub fund

Fees for CSE Registry:

Enrollment of Fund on the Central Registry and

Depository of CSE:

YFee for the undertaking of Fund for listing on

the Exchange Traded Fund Market (at the initial

listing stage).

YFee for the undertaking of Fund for listing on

the Mutual Fund Market (non-tradable) (at the

initial listing stage).

0,01%

For the calculation of the above charge, the total value of newly listed mutual funds on the CSE is derived as the result of the nominal value of a Fund.

Minimum charge €1.000

Maximum charge €10.000

€500

Annual fee for keeping of Fund register in the

CSD

Y Annual fee regarding the Exchange Traded

Funds Market.

Y Annual fee regarding the Mutual Funds

Market (Non-tradable).

€800 yearly

€500 yearly

Member Fees (for Tradable Market)

Y Variable Charge

Y Pre-agreed trades Charge

Y Central Depository fee for transactions

0,0125% on the value of transactions

0,01% on the value of transaction

0,02% of the value of transaction


17. Benefits / advantages for licensing and listing of funds in Cyprus and on the CSE

./ Member-State of the European Union (EU) / Favorable geo-strategic and financial position D Cyprus enjoys the benefits of the EU and Eurozone (harmonised

regulatory framework, Euro currency, free transfer of funds and offer of securities, European passport for issuing securities etc)

./ Favorable tax regime:

D Corporate tax of 12,5%

D No capital gains tax (on securities’ transactions)

D No fee is imposed on securities’ transactions, since 02/01/2014

D Regarding dividends paid to non-tax residents of Cyprus (no withholding tax)

D Wide list of double tax treaties (over 40 countries)

D Attractive incentives recently introduced for granting Cypriot nationality,


therefore EU citizenship, covering investments in listed securities (investment in funds held for 3 years fixed duration)

D Disposal or sale of unit holdings in a fund, is exempt from taxation

Benefits advantages for licensing and listing of funds in Cyprus and on the CSE

./ High level of professionals: Lawyers, Accountants, Custodians, Tax and Investment Advisors, Portfolio Managers, etc (consist an adequate network ensuring compliance with all legal / regulatory terms and requirements).

./ Local presence of many international investments firms and banking institutions.

./ Effective supervision by Regulator.

./ Enhanced marketing potential from EU Passporting.


18. Advantages provided by the listing on the CSE

./ Listed on a recognised and Regulated Stock Exchange.

D Securities listed on the Regulated Market of CSE have been recognised for tax purposes by the HMRC UK Tax Authority, since 2009.

D CSE was also recognised-accepted by the Federal Financial Markets Services (FFMS) of Russia, since 2010.

D Full recognition and high-rating by Thomas Murray Organisation, regarding the Central Securities Depository (CSD) of CSE / CSD successfully assessed against the ESCB – CESR Recommendations.

D Full and active member of FESE, ECSDA, WFE, ANNA (Associations of Securities Exchanges, Depositories, etc).

./ Potential increase of Fund’s investor base.

./ Simple, quick listing procedures, minimum bureaucracy, flexibility and effectiveness / Low cost procedures. CSE has experienced and specialist personnel to assist the industry.


Advantages provided by the listing on the CSE ./ Funds can be better marketed to investors and be eligible investment

proposition for particular investors e.g. pension schemes etc, therefore overcome specific restrictions from investing in unlisted securities or securities not listed on a recognised exchange.

./ Visibility and transparency is provided to investors. This provides a better public profile and prestige. Prices are posted on CSE’s site and are reported through the Exchange, by major data vendors etc.

./ Competitive pricing policy.

./ Price mechanism is provided (either through NAV postings, or market prices if traded).

./ Use of advanced infrastructure and technology of CSE.

All of the above are useful tools for marketing funds to investors internationally. Also, Regulation provides a better funds profile and credibility to investors.


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Cyprus fund and cse 2014

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collective investment

collective investment

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