WEALTH ASSET VEHICLES: THE CYPRUS INTERNATIONAL TRUST AND THE INTERNATIONAL COLLECTIVE INVESTMENT SCHEME OPTIONS

 SUCCESSFUL BUSINESS PEOPLE AND WEALTHY FAMILIES MAY POSSESS VALUABLE ASSETS WORLDWIDE  NEED FOR EFFICIENT STRUCTURE TO HOLD, PROTECT AND MANAGE THEM TO RESPOND TO THE DIFFERENT SYSTEMS AND RULES OF THE VARIOUS JURISDICTIONS UNDER COMMON AND CIVIL LAW  NEED FOR ASSET PROTECTION VEHICLES: – TRUSTS ARE THE VEHICLES IN COMMON LAW JURISDICTIONS – FOUNDATIONS ARE FOUND IN CIVIL LAW JURISDICTIONS  WE PRESENT THE CYPRUS INTERNATIONAL TRUSTS AS AN OPTIMUM OPTION NEED FOR ASSET PROTECTION VEHICLES

USES OF TRUSTS  SUCCESSION PLANNING: Smooth and effective transfer of assets from one generation to the other as per the wishes of the owner and not in line with the forced heirship rules  ASSET PROTECTION AGAINST THIRD PARTY: Assets transferred to a trust are protected from attacks from creditors, ex business partners and divorce disputes  TAX PLANNING: An efficient planning involving trust can help to avoid inheritance tax and optimize income or capital gains tax liability  CONFIDENTIALITY: The trust deed is not a public document and does not have to be disclosed to third parties  CONSOLIDATION AND CONTROL: Helps to avoid dissipation of wealth by spendthrift heirs and ensures the continuation of successful enterprises irrespective of the abilities and the differences of the heirs under professional management

CONCEPT OF TRUST An equitable obligation binding a person or a company, called ‘the trustees’ to deal with property over which he has control, called the ‘trust fund’, vested to him by the previous owner and creator of the trust, ‘the settlor’ for the benefit of other persons, called ‘the beneficiaries’ In accordance with the instructions and wishes of the settlor on certain terms and with certain powers, usually set out in the ‘Trust Deed’  In simple terms under a trust a settlor divests himself/herself of the legal title to property in favour of trustees, who derive no benefit from the trust itself, but they hold such property for the benefit of other persons

PARTIES TO THE TRUST  SETTLOR: Creates the trust and transfers his/her property to the trust and decides the terms of the trust and the rights to be granted to the beneficiaries and the powers to the trustees  TRUSTEES: They can be physical persons or legal entities ( the latter are known as Private Trust companies PTC) and manage the fund in line with the terms of the trust deed and the wishes of the settlor as they may be outlined in writing in the Letter of Wishes for the benefit of the beneficiaries  BENEFICIARIES: are those for whose benefit the trust was created and for whose benefit the trustees manage the trust property  THE PROTECTOR: This is the person that acts as a watchdog over the trust’s affairs and will have the right to appoint and dismiss the trustees, have their consent sought before trust capital is distributed or before the number of trustees is increased. The settlor may be a protector but as a rule a trustee may not. The protector has the right to veto general decisions taken by the trustees such as the decision to transfer the assets to the beneficiaries. A protector is not necessary but it may be appointed for the peace of mind of the settlor

IMPORTANT ASPECTS OF TRUST 1)1)  Divided ownership :The assets comprising the trust fund are legally held and registered as owned by the trustee and the trustee is under a duty to control and manage the property BUT only beneficiaries are entitled to the benefit and profit of the trust ; they own this property beneficially.  Trust does not posses separate legal personality:it operates by the trustees acting in their name  In many jurisdictions the same person may simultaneously be a settlor, trustee and the beneficiary of the trust ( though it is not advisable for tax or asset protection purposes)  Law of EquityTrust: Obligations and the beneficiaries rights are protected by court on the basis of the law of equity.If the trustees are unclear about the best way to manage the trust, or intend to alter the trust conditions as this is to the best interests of the beneficiaries, they can seek instructions and sanction of their actions from the court  Discretionary trusts give the trustees discretion on such matters as which beneficiary receives income and /or capital and when. The trustees require instructions on the use of discretion ( Letter of Wishes) In Fixed Trusts,beneficiaries have a fixed right to income and or capital

CYRPUS INTERNATIONAL TRUSTS  Cyprus Trust Law is based on International Trust Law 69/1992 based on the English system, The Trustees Law Cap 193 and the equity and Case Law in England  CIT is a trust whereby : – The settlor is not a permanent resident of Cyprus (to be abolished under the new trustees law) – The trust property does not include immovable property in Cyprus ( to be abolished) – At least one of the trustees is resident in Cyprus – The nature of CIT can be discretionary I,e the trustee is allowed to exercise a large element of discretion with regard to distribution of income and assets and to choose from a large ‘pool’ of potential beneficiaries which could very from year to year – Beneficiaries are not permanent resident of Cyprus ( to be abolished)  Duration: Max 100 years (to be abolished under the new trustees law)  A CIT may be irrevocable ( i.e the settlor cannot claim the return of the trust property from the trustees) unless otherwise stated in the trust deed ( clause of revocation)

PRIVATE TRUST COMPANIES A Private Trust Company (PTC ) is a company which has its main function acting as trustee of a particular trust or a number of related trusts, for example with the same settlor or related settlors Benefits: – Desire for a family control/ influence ( they can be directors of the PTC) Of course even without the PTC there are ways to meet the objective of influence by the family – Flexibility in appointing experienced and skilled persons – Quick decision making

EFFICIENT TAX STRUCTURE WITH CIT Cyprus Holding Company Operating Companies CIT Distribution of Income to Beneficiaries Trustees Physical persons or Company – Private Trust Company  Cyprus International Trust Protector Physical person or company 

BENEFITS OF CYRPUS INTERNATIONAL TRUSTS  Income gains and profits are exempted from income tax, capital gains tax and any other tax in Cyprus  No withholding tax on dividends, royalties received by Cyprus Company  No estate duty or inheritance tax in Cyprus  Confidentiality is safeguarded as registration is optional  Trusts may hold shares of Cyprus companies with Cypriot nominees for confidentiality  The same person can be the settlor, trustee (through offshore company in which he is the sole director and beneficial owner) and also beneficiary  No exchange control regulations  No reporting requirements

International Collective Investment Schemes (ICIS) The New Trend

 In May 1999, Cyprus introduced legislation enabling the establishment and regulation of International Collective Investment Schemes (‘ICIS’).  The Central Bank of Cyprus is the regulatory and supervisory authority for ICIS which issues the licences for establishment of International Collective Investment Schemes, which are the Cyprus Funds.  The sole objective of an ICIS is the collective investment of funds of unitholders.  Licensing Requirements: The Bank must be provided with such information so as to be satisfied as to the competence of the directors, promoters, managers or trustees  Taking into account the investment policy and the particular investment objectives, an ICIS may be designated as fixed or variable capital and can be :  An ICIS marketed to the general public  An ICIS marketed solely to experienced investors; or  A private international collective investment scheme (only 100 or less investors) 3 2 Introduction on Cyprus Funds( ICIs)

Common uses of a Cyprus fund  Property investments, namely in countries having double tax treaties with Cyprus (i.e. India, Russia, Poland and others)  Accumulation of funds of high net worth individuals in a private fund  Investments in securities bonds and other financial instruments  Collective fund of several sub-fund portfolios  Fund of a number of other funds or sub-funds

Characteristics & Structure of Private ICIS in the form of International Variable Capital Company ( the most commonly used type)  Maximum number of members upto 100 investors  Share capital of the company may vary according to the investors participating/exiting the fund Thus when investors buy, the company issues more units and when investors exit, the company reduces the number of units.  Board of Directors: the principal shareholder (s) may appoint themselves or their representatives to become members of the Board.  A Cyprus Holding Company needs to be formed for the formation of the fund, followed by the application to the Central Bank of Cyprus. The approval of the license is a 3 month procedure  Cannot be offered/ marketed to the general public and the right to transfer is restricted

Characteristics & Structure of Private ICIS in the form of International Variable Capital Company ( the most commonly used type)  Custodian needs to be appointed with whom assets are placed. Cyprus Banks are very trust worthy & also banks in other countries are also accepted as custodians  Administrator needs to be appointed in Cyprus whose task is to calculate the net assets value and other financial matters. The accountants of Globalserve can play this role  External auditor needs to be appointed. Dinos Antoniou & Co ltd can be auditor to ICIs  A Fund Manager needs to be appointed ( but it can also be a member of the board who is experienced in fund management)  Investors do not have to be experienced and there is no minimum subscription  It Is not required to apply investment restrictions

SPV N Cyprus Holding company SPV N Cyprus Holding company INVESTORS Family Foundation Trust Directly Physical Person Legal Entity AAA Investment Fund Advisory Committee Fund Board of Directors SPV 1 Cyprus Holding company SPV 2 Cyprus Holding company SPV 2 Cyprus Holding company Investment 1 Investment 2 Investment “N” Off-shore SPV 1 Off-shore SPV 1 Off-shore SPV 1 Off-shore SPV 1 Off-shore SPV N Off-shore SPV N Fund Custodian Auditors Fund Administration

11 Cyprus ICIS enjoy significant tax incentives:  An ICIS is treated identically as any other Cypriot entity, hence enjoys 10% flat corporation tax on annual net profits earned worldwide.  Exemption from tax on profits from sale of shares and other instruments.  Exemption from tax on foreign dividends received.  No withholding tax on income repatriation (dividends paid to unitholders).  No capital gains tax on disposal of shares/units by the holders.  A wide network of Double Tax Treaties in place with more than 45 countries worldwide. Funds also offer:  diversification of risk  Confidentiality with respect to the identity of the investors  Professional expertise in managing investments 2 BENEFITS OF ICIS

CONTACT US GLOBALSERVE CONSULTANTS LTD 9 VASSILI MICHAELIDES 3026, LIMASSOL-CYPRUS P.O BOX 57048, 3311, LIMASSOL, CYPRUS TEL , FAX WEB SITE: CONTACT PERSONS: DINOS ANTONIOU, C.E.O PHANI SCHIZA ANTONIOU, MANAGING DIRECTOR

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