THE BENEFITS OF CYPRUS AND THE ROLE
OF CIFA IN SUPPORTING THE
DEVELOPMENT OF THE FUNDS INDUSTRY
MR. ANGELOS GREGORIADES, PRESIDENT
JUNE 4, 2014
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.
Top 10 Domiciles of Worldwide Investment Fund Assets
(Market Share at Year-End 2013)
France 4.7%
Ireland 4.4%
United Kingdom
3.6%
Luxembourg
9.2%
USA 50.6%
Others 9.8%
Switzerland 1.2%
Brazil 4.7%
Australia 5.0%
Japan 3.2%
Canada 3.6%
Sources: EFAMA; Central Bank of Cyprus; CySEC.
1
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.
2
2.1 Competing Centres
Region
Fund Centres
Europe
Luxembourg
Ireland
Malta
Asia
Hong Kong
Singapore
3
2.2 Irish Funds Industry
2.2.1 Key Statistics
EUR billions
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
Total Assets Administered in Ireland
as of March 2014
 Significant presence of lawyers, accountants, listing brokers,
3,000
and other support services
2,500
 Member of the EU, Eurozone, OECD, FATF, and IOSCO
2,000
1,500
 More than 60 double tax treaties
1,000
 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.
500
0
Net Asset Value
4
2.2 Irish Funds Industry
2.2.2 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
5
2.3 Maltese Funds Industry
2.3.1 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.
6
2.3 Maltese Funds Industry
2.3.1 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.
7
2.3 Maltese Funds Industry
2.3.2 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
8
2.4 Cyprus Funds Industry
2.4.1 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
9
2.5 Competing Centres
Region
Fund Centres
Europe
Luxembourg
Ireland
How do we get
Cyprus on this
list?
Malta
Cyprus
Asia
Hong Kong
Singapore
10
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
11
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.
12
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.
13
3.2 Tax Comparison – Investment Funds1
Cyprus
Luxembourg
Ireland
Malta
Specific Tax Regime for
Investment Funds
No
Yes
Yes
Yes
Tax on the
disposal/redemption of
units
0%
0%
0%
0%
Tax on the profits
arising from the trading
of securities
0%
0%
0%
0%
Tax on interest income
12.5%
0%
0%
0%
0%
0%
0%
0%
Withholding tax on
payments of
dividend/interest
1. Applies to corporate form only.
14
3.3 Tax Comparison – Asset Management Companies
Cyprus
Luxembourg
Ireland
Malta
12.5%
29.22%
12.5%
5% (Reduced from 35%
following imputation
credit)
Withholding tax on
dividends
0%
15% (on non-DTT, non
EU/EEA countries)
20% (subject to DTT
relief)
0%
Withholding tax on
interest
0%
0%
20% (subject to DTT
relief)
0%
0%
0% (Subject to
participation exemption)
0% (if disposing company
owns at least 5%
shareholding)
0%
Corporation Tax
Capital Gains for nonresident shareholders
15
3.3 Tax Comparison – Asset Managers
Personal Income Tax
Rates
Schemes
Cyprus
Luxembourg
Ireland
Malta
Progressive up to 35%
Progressive up to 40%
Progressive up to 41%
Progressive up to 35%
50% exemption for
income over €100.000 for
a 5 year period from date
of first employment in
Cyprus
Skilled expatriates benefit
from relief on for
relocation, rent/utilities,
home leave trips, school
fees expenses subject to
conditions
Remittance basis taxation
for expatriates earning
income from sources out
of Ireland
A tax exemption of
€8,550 or twenty percent
(20%), (whichever is
lower)on the gross
emoluments for the first
three years of
employment in Cyprus
15% flat rate on income
over €75.000 subject to
conditions
Any qualifying income
over €5.000.000 exempt
from tax
16
4.0 ABOUT CIFA
4.1 History and Recent Achievements
2010
2011
2012
March: Cyprus
Investment Promotion
Agency (CIPA) sets up
Expert Advisory Group
for Investment Funds
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).
2013
2014
February: CIFA is
established
January: CIFA
Technical Committees
are established; First
official Members’
Meeting is held
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)
Application for EFAMA
Membership submitted
April: Presentation to
EFAMA Board for
membership
application
December: CIFA
Website is launched
18
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
Chaired by and comprised of
industry participants with direct
experience and expertise in the
related fields of the respective
committee in which they participate
CIFA BOARD OF
DIRECTORS
CIFA TECHNICAL
COMMITTEES
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
19
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.
20
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
21
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.
22
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.
23
THANK YOU
www.cifacyprus.org