Setting up an Alternative Fund in Cyprus

 An “Alternative Investment Fund” AIF is defined as any collective investment undertaking, including investment compartments thereof, which, collectively:  Raises capital from a number of investors, with a view to investing it in accordance with a defined investment policy for the benefit of those investors  The purpose of an AIF is collective investment in property belonging to the members of the scheme i.e. the unit holders

Investor Fund Fund Manager Administrat or AML Compliance Office Custodian Auditor Investments Investors pool their money by buying units to AIF Fund Manager invest this amount Returns are passed back to the investors Generate Returns on the pooled investmen ts

An AIF can be established either as: A. Open-ended fund, where investors have the right to redeem/repurchase their units upon request at (i) any time or, (ii) at regular intervals not exceeding one year OR as a: B. Closed-ended fund, where investors have the right to redeem/repurchase their units request at (i) regular intervals exceeding one year but less than five years or (ii) at a specific point of time which is defined in the fund rules or the instruments of incorporation of the AIF

 Cyprus now offers the full spectrum of legislative framework to all fund products  Two categories:  Limited number of persons (75)  Unlimited number of persons  An AIF can take any of the following legal forms:  Fixed Capital Company  Variable Capital Company  Limited Partnership  Common Fund

 Ability to create AIFs with unlimited investment compartments (i.e. umbrella funds) each with separate investment strategy pools  Can list the units on AIFs on various stock exchanges  Investor units are transferable  May be marketed to professional/well informed/retail investors

 Can be marketed to any type of investor, including retail investors  Can be created as a limited liability company, limited partnership or a common fund  Must be established with a minimum initial capital of EURO  The units of the AIF can be listed on a recognized stock exchange  Can be established with unlimited investment compartments, each with a separate investment strategy and asset pools

 Must be marketed only to professional or well informed investors  The maximum number of investors permitted, at any time, is capped at 75.  Invests a minimum of EUR 125,000 in the AIF  Can be created as a limited liability company or a limited partnership  There are no minimum initial capital requirements  There no investment restrictions  Can be established with unlimited investment compartments, each with a separate investment strategy and asset pools

Umbrella Fund Sub- Fund A Sub- Fund B Sub- Fund c Sub- Fund D Sub- Fund E The new Law introduces structuring options such as multiple investment compartments, enabling the management of different pools of assets in legally segregated sub-funds within a fund, each being subject to distinct policies

 Umbrella Funds have the following characteristics:  Established with several investment compartments  Each investment compartment has its own separate NAV calculation and issues units corresponding to its assets  Unitholders of a specific compartment only have rights arising from the assets of such compartment  Each compartment may be dissolved or liquidated separately without affecting the operations of the others

 Taxation of the Fund  Corporation tax at 12,5% on profits  Excluded from tax: Dividents received Profits on sale of securities Capital gains arising from sale of property abroad  No subscription tax on the net assets of the fund  Effectively only interest received is taxed at 12,5%

Taxation of the investors  Foreign Investors:  No withholding tax on dividents  No taxation on redemption of units  No deemed distribution restrictions  Resident investors:  A withholding tax of 17% if the investor is a physical person  No taxation on redemption of units  No withholding tax if investor is a company  Deemed distribution of 3% instead of 17%

 Set up fees – The fees for coordination, setup and obtaining the relevant license are estimated to be EUR 24,000 plus VAT and out of pocket expenses.  Annual maintenance fees – The annual maintenance fees of the AIF are estimated to be as follows: Fiduciary Services Fees – EUR 1000 plus VAT for the provision of Secretary and Registered office Provision of an Executive/Non-Executive Director –From EUR 10,000. Two Directors will need to be appointed Administrator Fee - % of NAV starting from 0,070% (minimum fee EUR 8,000 plus VAT) Depository Fees – Indicative Fees are EUR 10,000 plus VAT Audit Fees- Starting from EUR 10,000 plus VAT and increasing based on the volume and complexity of transactions

Ch. Ch. Ideal Business Services Ltd Address: Leof. Athalassas 176, Office 401, 2025 Strovolos, Nicosia, Cyprus Tel: Fax: Website: Contact Person: Charalambos Herodotou