I.What is an Alternative Investment Fund?

Alternative Investment Funds are described as investment funds not covered by the European Directive on Undertakings for Collective Investment in Transferable Securities (UCITS). This includes hedge funds, funds of hedge funds, venture capital and private equity funds and real estate.

In layman terms AIFs are funds brought together for investment purposes in other non-traditional assets (bonds, stocks, currencies etc.) such as real-estate, derivatives contracts, rare commodities etc.

Since July 2014 Cyprus has enacted the Alternative Investment Funds Law (AIF Law) allowing the establishment of funds within the Republic. The AIF Law allows for three different types of AIFs to be established:

1. AIFs available to the public with no limit to the number of investors in the form of a Company, a Common Fund or a Limited Liability Partnership

2. AIFs available to professional, experienced or well-informed investors, again with no limit to the number, in the form of a Company, a Common Fund or a Limited Liability Partnership.

3. AIFs with a limited number of participants (maximum

number of investors 75) in the form of a Company or a Limited Liability Partnership.

AIFs can also be divided into two main categories according to their purposes:

1. AIFs-UNP (Unlimited Number of Persons) and 2. AIFs-LNP (Limited Number of Persons)

Under the law, AIFs:• can segregate into sub-funds• can list units on various stock exchanges• allow for investors to transfer their units to other

investors• have various options when appointing an Investment

Manager and/or Depositary

Why Cyprus?Cyprus is the ideal jurisdiction for providing Financial Services to clients residing in European Member States for the following reasons:

• No restrictions are imposed by the Regulator regarding the type of investments.

• AIFs established in Cyprus can solicit investors across Europe choosing their own limitations in relation to

HOW TO SET UP AN AIF

numbers. • Subject to approval by the Regulator, AIFs can be self-

managed. • AIFs can be set-up sub-funds or be part of a bigger

fund allowing for multiple expansions and/or investment strategies, creating investment pools for multiple assets and policies.

• Cyprus offers favorable tax treatment because it has one of the lowest corporate taxation regimes in the European Union, and particularly favorable tax provisions pertaining to financial services. For example:

- No capital gains tax on profits from the sale of financial instruments.

- Dividend income is exempted from tax. - No tax on deemed dividends distribution for non-

tax-resident investors. - The legal form ‘‘Company’’ of an AIF can take

advantage of the double tax treaty network. - No onerous ongoing reporting requirements to the

Regulator. - Is the most cost efficient destination to establish

an investment firm with regard to cost of living.

II. Synopsis:

III. What Can CX Financia do for you?

Licensing/Registering an AIF with the Regulator

1. Identifying the appropriate type and form of AIF can be a difficulty that we can eliminate. We will closely assess your fund requirements and offer recommendations.

2. The next difficulty is the application package which, depending on each type and form, has different requirements. Our experienced team can prepare the full application package and assemble all the necessary documents. We will also assist and advise

AIFs-UNP AIFs-LNP

Legal Forms

• Common Funds • Fixed or Variable Capital Company • Investment Limited Partnership

• Fixed or Variable Capital Company • Investment Limited Partnership

Fund Management If a Company, there is the option to self-manage.

If a Company there is the option to self-manage.

Limitations / Restrictions

Number of Investors Unlimited Maximum 75 investors

Potential Investors • Professional investors • Well - informed investors • Retail investors

• Professional investors • Well - informed investors

Investor type

Certain investment restrictions may be imposed depending on the investor type and the overall investment policy

no additional restrictions

Assets Under Management

• No restrictions on Assets if AIFM appointed • If no AIFM is appointed Assets restrictions apply up to €100 million including leverage or €500 million without leverage and no redemption rights for 5 years

• Assets cannot exceed the AIFMD thresholds of €100 million with leverage or €500 million without leverage and a 5-year lock-up period.

Depositary / Custodian

• Mandatory appointment of a local Depositary if managed by an AIFM • If no appointment of AIFM, base can be anywhere • May be waived in a case where the total assets of the AIF are not subject to custody.

• Can be in the EU or in a third country • Can be waived if: - total assets of the fund are less than €5 million - or the fund has up to 5 investors - total fund assets are not subject to custody

Minimum Capital Requirement

• €125,000 with external management • €300,000 for self-managed Applies to each investment compartment when established as an Umbrella Fund

Not subject to Minimum Capital Requirement (MCR)

AIFs-UNP AIFs-LNP

Legal Forms

• Common Funds • Fixed or Variable Capital Company • Investment Limited Partnership

• Fixed or Variable Capital Company • Investment Limited Partnership

Fund Management If a Company, there is the option to self-manage.

If a Company there is the option to self-manage.

Limitations / Restrictions

Number of Investors Unlimited Maximum 75 investors

Potential Investors • Professional investors • Well - informed investors • Retail investors

• Professional investors • Well - informed investors

Investor type

Certain investment restrictions may be imposed depending on the investor type and the overall investment policy

no additional restrictions

Assets Under Management

• No restrictions on Assets if AIFM appointed • If no AIFM is appointed Assets restrictions apply up to €100 million including leverage or €500 million without leverage and no redemption rights for 5 years

• Assets cannot exceed the AIFMD thresholds of €100 million with leverage or €500 million without leverage and a 5-year lock-up period.

Depositary / Custodian

• Mandatory appointment of a local Depositary if managed by an AIFM • If no appointment of AIFM, base can be anywhere • May be waived in a case where the total assets of the AIF are not subject to custody.

• Can be in the EU or in a third country • Can be waived if: - total assets of the fund are less than €5 million - or the fund has up to 5 investors - total fund assets are not subject to custody

Minimum Capital Requirement

• €125,000 with external management • €300,000 for self-managed Applies to each investment compartment when established as an Umbrella Fund

Not subject to Minimum Capital Requirement (MCR)

on improvements and legal compliance of your operations and procedures, as well as advising on any queries or clarifications requested by the Regulator during the application process.

3. After authorization is acquired, we will provide license maintenance services by notifying you of all regulatory updates and announcements from CySEC and consulting on possible adjustments to your processes and procedures.

Estimated Timeframe • Application package preparation – 1-2 months.• CySEC application assessment.

- Maximum respond time 6 months. - Review and respond – average 2-3 months - If additional clarifications or information are

needed, a further 2 weeks - 1 month - Average 4-5 months after for full assessment after

submission.

CySEC offers the option to ‘Fast Track’ the evaluation pro-cess to 2 months for a fee of €25,000

Disclaimer: This material has been prepared for infor-mation purposes only and it is addressed to the general public and not to any specific recipient. It is not a substitu-tion for professional advice or legal opinion and no liabil-ity will be accepted. Readers must not rely on it without executing their own investigation and analysis regarding matters found in this material. No responsibility can be ac-cepted by the authors in respect of any actions, decisions or any losses arising directly or indirectly from the informa-tion provided in this material.

Contact Us:info@cxfinancia.com+357 99 611812+357 22323461www.cxfinancia.com Arsakiou 19, Strovolos 2045, Nicosia, Cyprus