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THE BENEFITS OF CYPRUS AND THE ROLE OF CIFA IN SUPPORTING THE DEVELOPMENT OF THE FUNDS INDUSTRY

MR. ANGELOS GREGORIADES, PRESIDENT JUNE 4, 2014. THE BENEFITS OF CYPRUS AND THE ROLE OF CIFA IN SUPPORTING THE DEVELOPMENT OF THE FUNDS INDUSTRY. 1.1 Size of the Industry as of Year-End 2013. Net assets of investment funds globally amounted to EUR 23,8 trillion;

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THE BENEFITS OF CYPRUS AND THE ROLE OF CIFA IN SUPPORTING THE DEVELOPMENT OF THE FUNDS INDUSTRY

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  1. MR. ANGELOS GREGORIADES, PRESIDENT JUNE 4, 2014 THE BENEFITS OF CYPRUS AND THE ROLE OF CIFA IN SUPPORTING THE DEVELOPMENT OF THE FUNDS INDUSTRY

  2. 1.1 Size of the Industry as of Year-End 2013 • Net assets of investment funds globally amounted to EUR 23,8 trillion; • Net assets of investment funds in Europe amounted to EUR 9,8 trillion; • UCITS comprised EUR 6,87 trillion; • Non-UCITS comprised EUR 2,92 trillion. Sources: EFAMA; Central Bank of Cyprus; CySEC.

  3. 1.2 Projected Growth of the Industry Through 2020 Currently in Cyprus, assets under management amount to just EUR 3,0 billion BUT Recent industry studies predict that global assets under management assets will increase by more than 40% by 2020. This growth will be driven by the increase in globalisation of the funds industry as well as the rise of middle classes and investor base in emerging markets.

  4. 2.1 Competing Centres

  5. 2.2 Irish Funds Industry2.2.1 Key Statistics • Current state • 12.889 total funds • Irish domiciled funds represented by 440 fund promoters from 55 countries • Overall industry supports 905 promoters • Over 3.600 funds and sub-funds listed on the Irish Stock Exchange • Over 13.000 persons employed by the industry • 16 Trustee / Custodian banks • 45 Administration Companies • Significant presence of lawyers, accountants, listing brokers, and other support services • Member of the EU, Eurozone, OECD, FATF, and IOSCO • More than 60 double tax treaties • Bilateral Memoranda of Understanding with 23 jurisdictions • Future state • By 2020: • Additional 7.000 to 10.000 direct and indirect new jobs in the industry • 40% increase in the assets under management to EUR 3,5 trillion Sources: IFIA, Central Bank of Ireland.

  6. 2.2 Irish Funds Industry2.2.2 Primary Strengths “The primary strength of the Irish funds industry, lies in the strength of the service providers and the integration of those providers across disciplines. There is, amongst these providers, a “can-do” attitude which serves clients very well.” Managing Director, UK Boutique Asset Manager “We found Ireland’s tax offering to be the most attractive and beneficial to our fund range. For us it was a key motivating factor in locating our fund platform in Ireland.” CFO, leading US Asset Manager “Ireland’s Central Bank is respected for the firmness and clarity of its regulation but also for its approachability and willingness to show flexibility where it is allowed to within the European regulatory framework on matters of form rather than substance.” Japanese Asset Manager

  7. 2.3 Maltese Funds Industry2.3.1 Key Statistics • Current state • 588 total funds domiciled in Malta with a combined NAV of EUR 8,95 billion (as of June 2013) • 72 Fund Managers • More than 30 funds listed on the Malta Stock Exchange • 7 Custodian banks • 28 recognised Fund Administrators • 10.000 persons employed by the finance industry • Significant presence of lawyers, accountants, listing brokers, and other support services • Member of the EU, Eurozone, and IOSCO • More than 60 double tax treaties • Bilateral Memoranda of Understanding with 25 jurisdictions Sources: MFSA, Finance Malta.

  8. 2.3 Maltese Funds Industry2.3.1 Key Statistics • Future state • The Government of Malta is committed to increase the sector’s contribution to 25% of GDP by 2015 (from 12% in 2010) • Drawbacks and Limitations • Limited availability of internationally reputable custodians on the island • Professional labour pool, namely lawyers and financial services professionals, is not big enough to meet demand as the industry continues to grow Sources: MFSA, Finance Malta.

  9. 2.3 Maltese Funds Industry2.3.2 Primary Strengths “…The high growth results are being driven by a number of key factors which include the high standards of regulatory oversight, the presence of an accessible regulatory body, the availability of highly qualified and multilingual human resources as well as the competitive set up and ongoing operational costs.” Kenneth Farrugia, Chairman of the Malta Funds Industry Association “…We found Malta to be a friendly place for fund business. Moreover, the costs are significantly lower when compared to other more established EU fund domiciles.” Chairman, leading Asset Manager “…Implementing directives they have proved themselves to be extremely efficient and industry friendly in implementing them.” Professional Services Provider

  10. 2.4 Cyprus Funds Industry2.4.1 Key Statistics Current state • 103 funds as of May 2014 (100 ICIS and 3 UCITS) • Total assets under management of EUR 3,0 billion as of year-end 2013 • 2 UCITS Management Companies • 158 Cyprus Investment Firms (MiFID) • 67 are also authorised for portfolio management and have a reported EUR 2,2 billion under management as of year-end 2013 • 7 Custodian banks • More than 20 recognised Fund Administrators • Significant presence of lawyers, accountants, listing brokers, and other support services • Member of the EU, Eurozone, and IOSCO • More than 45 double tax treaties • Bilateral Memoranda of Understanding with 19 jurisdictions Drawback and Limitations • Limited availability of internationally reputable custodians on the island • Lack of awareness on an international level as to the benefits of Cyprus as a fund jurisdiction But also • Lack of awareness at the domestic market

  11. 2.5 Competing Centres How do we get Cyprus on this list?

  12. 2.6 Fund Managers Macro Considerations Political stability Strong banking system Expertise and experience in servicing investment funds Business friendly regulator Early adoption of new laws Cost competitiveness Tax efficiency

  13. 3.1 Attributes of Cyprus as a Fund and Asset Management Jurisdiction • Strategic geographic location and access to new markets: • At the crossroads of three continents - namely Asia, Europe and Africa - and a gateway to the Middle East; • Significant experience with the markets of Russia and Central and Eastern Europe; • In recent years have gained a strong foothold in Asian markets, particularly India and China. • We do have experience in the investment funds and asset management sectors: • International Collective Investment Schemes Law has been in place since 1999; initiatives taken recently to modernise this framework, with enactment intended in the coming weeks; • A significant number of investment firms have been authorised by CySEC since 2003 that are affiliated with international asset management groups; • Legal framework reflects harmonisation with related EU Directives (AIFMD, UCITS IV and MiFID). • Established local and international service providers service the industry, offering a wide range of customised services; • This includes both firms of international stature and local boutique players offering investment management, administration, custody and audit services.

  14. 3.1 Attributes of Cyprus as a Fund and Asset Management Jurisdiction • Other attributes of Cyprus include: • More than 30 years experience as an International Business Centre including the presence of International Banking Units and multinational companies; • Significant economic memberships such as WTO, World Bank, IBRD, and IMF; • Modern and transparent legal system based on common law; • Financial reporting system based on IFRS; • Ranked 39th worldwide by the World Bank in its Doing Business 2014 report; • Cypriot legal framework is in line with the relevant EU Directives regarding Anti-Money Laundering Measures; • Fitch and Moody’s have recently upgraded the ratings of Cypriot banks with a positive outlook. • We rank fifth in the ranking by Knight Frank for best country to live.

  15. 3.2 Tax Comparison – Investment Funds1 1. Applies to corporate form only.

  16. 3.3 Tax Comparison – Asset Management Companies

  17. 3.3 Tax Comparison – Asset Managers

  18. 4.0 about cifa

  19. 4.1 History and Recent Achievements 2010 2011 2012 2013 2014 March: Cyprus Investment Promotion Agency (CIPA) sets up Expert Advisory Group for Investment Funds February: CIFA is established April: CIFA was registered as an Association under applicable law September:CIFA Newsletter is launched (issued on a quarterly basis with contributions from CIFA Members as well as government and regulatory authorities) December:CIFA Website is launched January: CIFA Technical Committees are established; First official Members’ Meeting is held Application for EFAMA Membership submitted April: Presentation to EFAMA Board for membership application 2010-2012: Expert Advisory Group for Investment Funds works closely with regulatory authorities and government stakeholders on related industry and regulatory developments. As a natural development of the progress made during these years, the Expert Advisory Group decided on the establishment of the Cyprus Investment Funds Association (CIFA).

  20. 4.2 Structure 13 members comprising highly reputable industry professionals experienced in all aspects of the industry, including fund management, administration, advisory, banking, audit and legal CIFA BOARD OF DIRECTORS Chaired by and comprised of industry participants with direct experience and expertise in the related fields of the respective committee in which they participate • Nine Technical Committees: • UCITS & AIFs Committee • Fund / Asset Management Committee • Cyprus Investment Funds Distribution Committee • Fund Administration / Custodian Committee • Legal and Regulatory Committee • Ethics and Risk Management Committee • Tax Committee • Statistics and Fund Research Committee • Training / HR Committee CIFA TECHNICAL COMMITTEES

  21. 4.3 Mission and Role • CIFA’s Mission is to: • Act as the single representative body of the industry in Cyprus, representing the sector in economic missions organised by the Cyprus government around the world, and taking active part in principal meetings of the global industry; • Provide support to its members; • Encourage maintenance of industry standards and professionalism; • Be engaged in the development of related regulatory aspects; • Promote and support the development of the Cyprus Investment Fund industry.

  22. 4.4 Objectives Short-Term • Generate awareness of the funds industry in the Cypriot market • Open dialogue with universities and IT companies for knowledge building • Review Cyprus taxation regime • Increase membership of CIFA to support marketing efforts • Become a member of EFAMA and organise international seminars in Cyprus • Continue the publication of relevant promotional and informational materials Long-Term • Promoting and projecting Cyprus internationally as a centre for the set up and management of investment funds • Cooperation with government and regulatory authorities in Cyprus for the continued modernisation of our legal and tax frameworks following international trends • Cooperation with service providers, including banks, to ensure our service deliverables are of international standard • Upgrading the professional qualifications, the credibility, professional ethics and quality of services provided by its members • Review and analyse developments to identify opportunities and challenges • Preserve and strengthen the confidence of investors in the investment funds sector through regular presentations

  23. 4.5 EFAMA Membership Application • CIFA submitted an application to the European Fund and Asset Management Association (EFAMA) in January 2014 and subsequently made a presentation to the Board of Directors of EFAMA in April 2014. • Application will be voted on by the Board in June 2014, where we anticipate to be granted an Observer status; • Following two years as an Observer, the Board will vote on whether they would like to grant full membership. • Benefits of EFAMA Membership include: • Representation on the Board of Directors of EFAMA; • Representation at EU Commission level for all developments affecting the EU investment management industry; • Participation in discussions about key industry issues, seeking common standards, developing best practice recommendations; • Raising of professional practice standards in Cyprus; • Participation in organised industry initiatives and in the publication of Guidelines to the industry; • Remaining abreast of developments in the fund industry by participating in EFAMA meetings,  conferences and seminars.

  24. 5.0 Where do we go from here? IMMEDIATE NEXT STEPS • Finalise our strategic plan to place Cyprus on the map of competing centres. • For the effective promotion of Cyprus as a fund and asset management jurisdiction: • Enactment of the new Alternative Investment Funds Law; • Amendments to UCITS legislation; • Present the role of CIFA in the development of the Cyprus Funds Industry to the President and the Cypriot business Community on July the 7th 2014 at the Presidential Palace. • With the support of EFAMA to organise an International Funds Forum in November 2014 bringing together in Cyprus Fund Managers from Europe and the Middle East.

  25. THANK YOUwww.cifacyprus.org

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