GOLD ISSUE 39

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IssuE 39 JuNE 14 - JulY 13, 2014 PRICE €4.95

5 29 12 95 00 05 77

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the international investment, finance & professional services magazine of cyprus

Demetris Taxitaris

Charles Charalambous

Constantinos Papanastasiou

Charalambos Phokas

George Rologis

Andreas Athinodorou

Chris Odysseos Christoforos Antoniades

Andreas Yiasemides

Marios Tannousis Angelos Gregoriades

Ioannis Gaiganis

Looking For Funds CIFA AND ThE INVEsTMENT FuNDs sECTOR

BRANDING

Jonathan Gabay on the key to brand success

INTERVIEWs

simon Fasdal Martin luxemburg Andrei Narutsky

ECONOMY

The Troika’s three challenges to Cyprus

Plus:

MONEY / BusINEss ECONOMY TAX & lEGAl lIFEsTYlE / OPINION

www.pwc.com.cy

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Issue 39 June 14-July 13, 2014

6 EDITORIAL 8 UP FRONT 14 FIVE MINUTES WITH…

LOOKING

THE INVESTMENT FUNDS SECTOR IN CYPRUS IS EXPECTED TO BECOME ONE OF THE MAJOR PILLARS OF THE COUNTRY’S FINANCIAL INDUSTRY IN THE COMING YEARS. THE CYPRUS INVESTMENT FUNDS ASSOCIATION (CIFA) WAS ESTABLISHED WITH THE PURPOSE OF PROMOTING THE INVESTMENT FUND INDUSTRY BOTH AT A LOCAL AND INTERNATIONAL LEVEL. CIFA PRESIDENT ANGELOS GREGORIADES EXPLAINS WHAT CYPRUS NEEDS TO DO IN ORDER TO COMPETE WITH OTHER SUCCESSFUL JURISDICTIONS AND TO BE CONSIDERED A CREDIBLE DESTINATION FOR FUNDS AND FUND MANAGEM MANAGEMENT.

48

FOR FUNDS

PLUS

SPECIAL AD V FEA ERTISING Invest TURE men Firms O t Funds: ffe Services ring the Sectoto r. P.23

+ OPINION

52

60 | PAST, PRESENT & FUTURE

16

DOUBLE STANDARDS By George Ioulianos

46

ECONOMIC MATCHMAKING By Savvas Savouri

59

EXTRA RIGHTS = EXTRA RESPONSIBILITIES By Petros Florides

63

Christos S. Christodoulou on his firm’s first successful decade and how he sees the next one for Cyprus and the professional services sector.

64 | FAMILY MATTERS Andrei Narutsky, Managing Director of LEON Family Office, on why the introduction of family offices to the island would add an extra dimension to Cyprus’ wealth management product.

68 | IF AT FIRST YOU DON’T SUCCEED…

FEATURE 48 | UP, UP AND AWAY Global investment prospects are positive, though things will be slower than expected – but not in Cyprus, says Simon Fasdal.

There is no shame in failure, says Martin Luxemburg, co-founder of the Erasmus Centre for Entrepreneurship.

60

70 | TESTING TIMES George Theocharides gives an expert overview of the present state of the economy, what led to it and how Cyprus can return to growth.

52 | BRAND NEW WORLD

XXX

Jonathan Gabay, the highly respected creative branding, PR and reputational management authority, speaks to Gold.

56 | GETTING BETTER Theo C. Parperis, Partner & Head of Global Compliance Services, PwC, on how Cyprus can ameliorate its business practices and strengthen its model. 4 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

FAMILY

MATTERS Survival in the global business jungle is a matter of strict focus \UMHPSPUN ÄULZZL HUK P[ transpires, allowing MVY [OL ÅV\YPZOPUN VM MHTPS` VMÄJLZ. By Chloe Panayides

64

30 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

“B

y definition, a family office is intensely intimate. You are not just your client’s advisor, you are their confidant,” Andrei Narutsky, Managing Director of LEON Family Office declares. Following a day of exhaustive discussion and dialogue among public and private stakeholdth ers at the 4 Nicosia Economic Congress, Narutsky and I take a seat in the expansive lobby of the Hilton Park Hotel. With talk of economic recovery in mind, fresh from the day’s discourse, our attention turns to this somewhat elusive entity: the family office. It is an increasingly ubiquitous term and there is a growing body of opinion that encouraging the introduction of family offices to the island would add an extra dimension to Cyprus’ wealth management product, giving it a competitive edge whilst simultaneously invigorating the local economy. It would constitute the opportunity – so to speak – to reap the lion’s share of a wealthy family’s value. But what exactly is a family office? Narutsky is the ideal person to ask: “A family office is incredibly niche and personal, dealing with the very specific requirements of ultra high-net worth individuals,” he tells

me. For LEON Family Office, that description “ultra high-net worth” refers to wealth far exceeding €100 million. Narutsky continues: “At LEON, we are concerned with investment advisory and personal financial planning for our clients. We act as their personal chief investment officer. For them, it makes sense to have an outsourced advisor as opposed to an ‘in-house’ advisor, purely because of the acutely high level of expertise needed to handle this level of worth. Further to an investment plan, our clients often require ancillary services, such as wealth structuring and coordination, succession planning, and more.” Designing bespoke strategies requires careful consideration of a client’s unique situation, assessing his/her long-term objectives that are thereafter factored into the overall investment plan. LEON’s particular model, Narutsky explains, is classic: that is, setting strategic goals, building a long-term investment strategy, and maintaining optimal asset allocation for the best risk/reward ratio. “We then implement and oversea the underlying investments, measuring performance and returns. Most of our clients are first-generation entrepreneurs and are therefore too busy

to be able to do this all by themselves.” And just how many clients does LEON have? “Currently, we service five families. We could go up to 12 and an absolure maximum of 15; above that, a multi-family office transitions into a private bank,” Narutsky states. Indeed, just how are the services of a family office distinct from those afforded by a private bank? “Well,” Narutsky begins, “A bank is a good platform for the custody and safekeeping of its clients’ assets but bankers usually do not see the whole picture of the family and cannot propose truly comprehensive solutions. Bankers work to specific templates imposed on them by their respective banks’ policies and they are likely to have a conflict of interest between their own short-term profit targets and the long-term interests of the client. With a family office, by contrast, there is absolutely no conflict of interest. We work solely in the best interest of the client, as opposed to the best interest of the bank, as well. We always start with the analysis of the longterm needs of the client and investments are chosen solely with this goal in mind.” Responding to the question of what qualities a professional must possess to be able to effectively run a family office, Narutsky

THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

Gold 31

76 78 82 84 86

{money} {business} {economy} {tax & legal} {lifestyle}

EDITORIAL

Listen and Learn We have two ears and one mouth, so we should listen more than we say. Zeno of Kitium, 333-264BC.

W

e all have an unfortunate tendency to believe that we can become experts on virtually everything with very little effort. Subjects about which we knew nothing a few months ago have become topics of everyday conversation, from non-performing loans to Central Bank regulation, and from who is responsible for the mess that Cyprus found itself in 15 months ago to what our attitude towards Russia should be after the Crimea crisis. It’s human nature to gather information and draw conclusions from it and, provided we choose our sources wisely, it keeps us up-to-date and aware of what is happening in the world around us. Regrettably, certain people who ought to know better seem to think that jumping to conclusions is a great form of exercise. I refer, among others, to a considerable number of the Members of the House of Representatives who frequently give the impression that their ears are closed to anything that has not been announced by their own party. It is the only logical explanation for their continuing refusal to accept the fact that, like it or not, there were strict conditions attached to the deal that saved Cyprus from bankruptcy and the €10 billion we needed was a loan and not a late Christmas present. The role of the Opposition, is, of course, to oppose the Government and to question its every move. This is how democracy works. But calling every single decision into question is actually to make a mockery of the democratic process, particularly when the Opposition consists of those who were previously in government and have been shown to be largely responsible for the situation from which their successors are now trying to extricate us. And it’s not only the politicians. Who did not laugh (with contempt) upon hearing the leader of the civil service union state that his members were against the proposed merger of the Inland Revenue Department and the VAT Service “because it is unconstitutional”? Perhaps that explains why the civil service has such a bad reputation for its attitude towards the public – those hardworking officials have been spending too much time studying the constitution. Last month, the politicians suddenly started saying that they were listening to the people (as if this was something new). They were saying it because of the unprecedented level of voter apathy revealed by the low turnout in the European elections. The message was very clear: “We don’t care about Europe; we don’t care about politics; we don’t care about you”. They would do well to listen to the people who made the effort to vote them into parliament if they wish to stay there. They should also start listening to the experts who are constantly sharing their ideas and opinions with us at the invitation of both the public and private sectors, many of whom also express their views each month in the pages of Gold. This month’s issue is packed with expert opinion on a host of issues, from the island’s fledgling Investment Funds sector – see the interview with CIFA President Angelos Gregoriades (page 16) to the work of Family Offices – in the experienced view of Andrei Narutsky (page 64). Simon Fasdal, Head of the Fixed Income Trading desk at Saxo Bank, has 17 years of market and trading experience. He shares his views on page 48. Jonathan Gabay, who has been in the business of brands and PR for 25 years, talks to Gold on page 52. Two Cypriots – Theo Parperis, Head of Global Compliance Services at PwC (page 56) and George Theocharides, Associate Professor of Finance at the Cyprus International Institute of Management (page 70) – also give us the benefit of their expertise, explaining what Cyprus needs to do in order to recover and grow. We can never know too much. Those who are responsible for taking the decisions that affect us should be the first to recognize this and have the required humility to listen to all those who know more than they do, no matter what the topic of discussion. Larnaca’s most famous son, the Stoic philosopher Zeno of Kitium, knew what he was talking about.

John Vickers, Chief Editor john@imhbusiness.com

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THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

BANKING How Spain restructured its system

BITCOIN The Future of the Digital Currency

INTERVIEWS Peter Greenberg Matthew Kidd Alexis Tsielepis

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6- ;/, (<+0; 7YVMLZZPVU PU *`WY\Z

6 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

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MANAGING DIRECTOR

George Michail

GENERAL MANAGER

Daphne Roditou Tang MEDIA MANAGER

Elena Leontiou EDITOR-IN-CHIEF

John Vickers JOURNALISTS

Effy Pafitis, Chloe Panayides CONTRIBUTORS TO THIS ISSUE

Petros Florides, George Ioulianos, Savvas Savouri ART DIRECTION

Anna Theodosiou SENIOR DESIGNER

Alexia Petrou PHOTOGRAPHY

Jo Michaelides MARKETING EXECUTIVE

Kevi Chishios SALES & BUSINESS DEVELOPMENT EXECUTIVE

Phivos Karayiannis ADVERTISING EXECUTIVES

Irene Georgiou, Christopher Constantinou OPERATIONS MANAGER

Voulla Nicolaou SUBSCRIPTIONS

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Cassoulides Masterprinters CONTACT 5 Aigaleo St., Strovolos 2057, Nicosia, Cyprus Mailing address: P.O.Box 21185, 1503, Nicosia, Cyprus Tel: +357 22505555, Fax: +357 22679820 e-mail: gold@imh.com.cy website: www.goldmagazine.com.cy subscriptions: goldsubscriptions@imh.com.cy

UP FRONT

CAREER DEVELOPMENT

Tax Firm

TRAINING FOR ACCOUNTANTS

of the YEAR

D

eloitte Cyprus received the “Cyprus Tax Firm of the Year” award for 2014, at the 10th Annual International Tax Review (ITR) European Tax Awards. Deloitte Cyprus was presented with the award at a ceremony in London on 21 May 2014. This is the second consecutive year that Deloitte Cyprus has

received this highest international recognition. “This significant new achievement strengthens our commitment in providing exceptional quality services and encourages us to set even higher standards”, said Pieris Markou, Head of Tax and Legal Services at Deloitte Cyprus (pictured).

BUSINESS MODEL GENERATION MASTERCLASS

O

pen Box Communication is presenting a Business Model Generation Masterclass aimed at Senior Executives/Strategists and Business Development/Marketing Managers seeking to innovate new or existing business models in order to empower [OLPY Z[YH[LN` HUK PUJYLHZL WYVÄ[HIPSity. The Business Model Canvas is a systematic and practical tool that helps both entrepreneurs and ‘intrapreneurs’ share a common visual methodology, enabling them to facilitate results X\PJRS` HUK LɉJPLU[S` Open Box Communication is one of [OL ML^ JVTWHUPLZ PU [OL ^VYSK JLY[PÄLK by Strategyzer Academy, the creators of Business Model Generation. Through powerful case studies from

start-ups and Fortune 500 companies, and intense hands-on workshops, attendees will learn and apply a practical visual language to understand, challenge, prototype and create solid business models using customer development and design thinking. Dates: July 10 and 11, 8:30am5:00pm in Nicosia. For registration and fees please visit: https://www.eventbrite.com/e/ business-model-generation-masterclass-nicosia-registration-10989396581

T

he Chartered Accountants’ Benevolent Association (CABA), ICAEW and ICPAC have developed career development training specifically tailored to membership needs in Cyprus. The training will provide a series of workshops to help members progress in their career. It is free of charge to ICAEW members and students and ICPAC members, who will

receive 6 CPD points for attending. The workshops will be on Creating effective self-marketing and Networking and personal branding (both with Neil Sampson, CABA career coach) and Developing and maintaining a growth mindset (with Viv ThackrayDutton, CABA coach and trainer) Christiana Diola, ICAEW services and technical manager for Cyprus, told Gold: “The business environment in Cyprus, like much of Europe, is tough. Professionals can no longer afford to be complacent but need to access the tools and support to build their resilience and adapt to the new environment. These new courses are a wonderful op-

THE FIRST WORKSHOPS WILL TAKE PLACE AS FOLLOWS: 24 JUNE

Cleopatra Hotel, Nicosia

25 JUNE

Carob Mill, Limassol

26 JUNE

Golden Bay Beach Hotel, Larnaca

portunity to partner with CABA and offer a more holistic service to members in Cyprus, recognising that member support extends beyond technical services to soft skills and resilience training that will create sustainable careers and enhance the wellbeing of chartered accountants.” Kath Haines, chief executive at CABA, added: “We first visited Cyprus to deliver courses immediately after 2013’s banking collapse and found accountants who were facing difficult times with a high degree of resilience. However, conditions remain difficult and the general situation places huge pressure on anyone working in the profession. These new workshops are designed to build on last year’s event and provide further support.” For more information and registration: http://www.caba.org. uk/cyprus

SAXO BANK’S MACROECONOMIC OUTLOOK PRESENTATION

L

e Meridien Limassol Spa and Resort was the venue for an exclusive Macroeconomic Outlook Presentation with a focus on bond markets hosted by Saxo Bank, the online multi-asset trading and investment specialist, on 15 May. The main speaker at the event was Simon Fasdal, Head of Saxo Bank’s Fixed Income Desk. In the first part of his first presentation, entitled “Europe: Make or Break”, Fasdal focused on the present scenario for Europe, and the challenges facing European economies, despite the optimism

seen in the markets in 2013, especially in European equities and bonds. The second part of the presentation focused on Emerging Market bonds but the topics were relevant to all asset classes. Simon Fasdal explained how the turbulence of 2013 in Emerging Markets repriced large parts of their assets and reset many economies, now with weaker currencies and lower growth, showing that even though fragility is present in Emerging Markets, there are also considerable investment opportunities in the midst of this turbulence. The event was coordinated by IMH.

8 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

SEE AN INTERVIEW WITH SIMON FASDAL ON PAGE 48

UP FRONT

4th NICOSIA ECONOMIC CONGRESS

T

he Institute of Certified Public Accountants of Cyprus (ICPAC) and Gold magazine organised last month’s 4th Nicosia Economic Congress on The State of the Cyprus Economy. Respected speakers from Cyprus and abroad analysed the latest developments and presented their forecasts for the European and Cypriot economies for the next two years. Particular reference was made to those EU countries that were placed under Troika supervision and have since successfully exited the Memorandum of Under-

standing. The leaders of DISY and AKEL, Averof Neophytou and Andros Kyprianou, debated their views on the economy while the CEOs of the island’s main banks discussed issues of liquidity and non-performing loans. Organisers: ICPAC and Gold. Communication Sponsors: IN Business, inbusinessnews. com and Gold News. Coordination: ΙΜΗ. Main Sponsor: Alpha Bank Cyprus. Gold Sponsors: Deloitte, Lamda Card Services, Staroil and Globaltraining. Silver Sponsor: Ancoria Insurance Public Ltd.

Theo Parperis, ICPAC, Omiros Pissarides, Axia Ventures, George Mountis, Emergo Wealth, Sofronis Clerides & Andreas Charitou, University of Cyprus.

Theo Parperis, ICPAC, Marios Clerides, Cooperative Central Bank, John Hourican, Bank of Cyprus, George Georgiou, Alpha Bank Cyprus & George Appios, Piraeus Bank (Cyprus). Chysanthos Tsouroullis, Dias Group, Averof Neophytou, DISY & Andros Kyprianou, AKEL.

Portuguese Ambassador Joao Perestrello & Indian High Commissioner Ravi Bangar. Nicosia Mayor Constantinos Yiorkadjis & former Strovolos Mayor Savvas Iliofotou.

The Congress was attended by THQVY ÄN\YLZ MYVT [OL SVJHS ÄUHUJPHS and business community.

Constantinos Petrides, Under-Secretary to the President, Irena Georgiadou, Hellenic Bank, & Takis Palaikythritis, Limassol Marina.

6LOYHU 6SRQVRU

10 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

Nicos Nouris, DISY, & Nicholas Hadjiyiannis, Cooperative Central Bank.

*ROG 6SRQVRUV

0DLQ 6SRQVRU

MARIOS

THE FIRST NAME IN AT T E N T I O N TO D E TA I L

We are one of the world’s largest independent providers of trust, fund and corporate administration services. We are committed to helping our clients protect, nurture and grow their wealth. Above all, we are a people business. To find out more about our services and to get to know us better, visit www.firstnames.com

UP FRONT

THE WORLD’S RICHEST

MUSICIANS

M

asters of their domain, these individual are musically inclined. Whether they are playing live in concert or on the soundtrack of your favourite film, our best-loved songs would not be possible without them. Whether they are writing lyrics, playing an instrument, singing songs or producing records, they are making money thanks to their talents. Some of them are making lots of it. Take a look at our list and see how many of them strike a chord within you.

1. Andrew Lloyd Webber

10 P TO

6. Elton John

(66, composer, UK) Net Worth: ₏882 million The British composer is the world’s most successful modern writer of stage musicals. His successes include Jesus Christ Superstar, Evita, Cats, Starlight Express and The Phantom of the Opera. He was knighted in HUK Ä]L `LHYZ SH[LY ILJHTL 3VYK 3SV`K >LIILY

(67, singer/songwriter, UK) Net Worth: â‚Ź260 million 0U OPZ Ă„]L KLJHKL JHYLLY OL OHZ ZVSK TVYL than 300 million records. His single Candle in the Wind 1997 sold over 33 million copies ^VYSK^PKL HUK PZ [OL IPNNLZ[ ZLSSPUN ZPUNSL of all time. He received a knighthood in 1998 MVY OPZ ZLY]PJLZ [V T\ZPJ HUK OPZ JOHYP[HISL services.

2. Paul McCartney

7. Mick Jagger (70, singer/songwriter, UK)

(71, singer/songwriter, UK) Net Worth: â‚Ź602 million He is one of the most successful composers and performers of all time, with sales of V]LY TPSSPVU HSI\TZ VM OPZ ^VYR ^P[O [OL Beatles and as a solo artist. More than 2,200 artists have covered his song @LZ[LYKH`. He was knighted In 1997.

3. Herb Alpert (79, trumpet player/record

company owner, US) Net Worth: â‚Ź551 million (SWLY[ [OL ¸(š PU ( 4 9LJVYKZ [OL SHILS OL MV\UKLK ^P[O I\ZPULZZ WHY[ULY 1LYY` 4VZZ OHZ ZVSK TPSSPVU HSI\TZ ^VYSK^PKL HUK PZ [OL VUS` WLYZVU [V [VW [OL <: JOHY[Z HZ H vocalist (;OPZ .\`ÂťZ 0U 3V]L >P[O @V\, 1968) and as an instrumentalist (Rise, 1979).

4. Emilio Estefan (61, record producer, US/Cuba)

Net Worth: â‚Ź367 million :[LMHUÂťZ Ă„YZ[ [HZ[L VM MHTL JHTL with Miami Sound Machine, fronted I` OPZ ^PML .SVYPH ,Z[LMHU 0U OL NH[OLYLK KVaLUZ VM 3H[PUV LU[LYtainers to record a Spanish version of We Are The World which was released [V YHPZL TVUL` MVY [OL /HP[P 9LSPLM Fund.

5. Bernie Taupin (64, lyricist, UK)

Net Worth: â‚Ź330 million “The man who writes the words for Elton Johnâ€? has created ZVTL VM YVJR T\ZPJÂťZ ILZ[ RUV^U S`YPJZ PUJS\KPUN OP[Z Z\JO as Your Song, Rocket Man, Daniel and Candle In The Wind, which OL YL ^YV[L HZ H [YPI\[L [V [OL SH[L Diana, Princess of Wales.

12 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

1

2

Net Worth: ₏241 million +\YPUN OPZ `LHY JHYLLY [OL SLHK ]VJHSPZ[ HUK MV\UKLY TLTILY VM [OL 9VSSPUN :[VULZ OHZ ILLU VUL VM [OL TVZ[ WVW\SHY HUK PUÅ\LU[PHS WLYMVYTLYZ PU [OL OPZ[VY` VM WVW rock music. In 2003 he was knighted for his services to music. Maroon 5’s 2011 song 4V]LZ 3PRL 1HNNLY PZ HIV\[ OPT

3

=8. L.A. Reid (57, songwriter/producer, US)

4

Net Worth: â‚Ź220 million 9LPK HUK 2LUUL[O Âş)HI`MHJLÂť ,KTVUKZ MV\UKLK 3H-HJL ^OPJO SH[LY TLYNLK with Arista Records, where he was made WYLZPKLU[ HUK *,6 /PZ Ă„YZ[ ZPNUPUN ^HZ [OL \URUV^U (]YPS 3H]PNUL /L SH[LY YLZ\YYLJ[LK 4HYPHO *HYL`ÂťZ JHYLLY HUK OL OHZ YLJLU[S` OHK Z\JJLZZ ^P[O 2HU`L >LZ[ 9POHUUH HUK 1\Z[PU )PLILY

5 6

=8. Gene Simmons (64, musician/songwriter, US)

Net Worth: â‚Ź220 million ;OL 0ZYHLSP IVYU (TLYPJHU IHZZ N\P[HYPZ[ HUK JV SLHK ]VJHSPZ[ VM 2PZZ [OL IHUK OL JV MV\UKLK PU [OL LHYS` Z OHZ ZVSK TVYL [OHU TPSSPVU HSI\TZ ^VYSK^PKL ([ [OL OLPNO[ VM 2PZZÂť WVW\SHYP[` OL OHK OPZ MHTV\ZS` long tongue insured for $1,000,000. He is wellRUV^U MVY OPZ JOHYP[` ^VYR

7 =8

10. Keith Richards (70, musician/songwriter, UK)

Net Worth: ₏205 million The guitarist, songwriter and co-founder of the Rolling Stones has written most of [OL IHUKZ OP[Z ^P[O 4PJR 1HNNLY PUJS\KPUN Satisfaction, Brown Sugar, Jumpin’ Jack -SHZO /VUR` ;VUR >VTLU and Start Me <W 0U OL W\ISPZOLK 3PML, his acclaimed H\[VIPVNYHWO` 1VOUU` +LWW IHZLK [OL character of Jack Sparrow on him.

=8

10

Your dream of yesterday, becomes real today.

(/53).' LOANS

4.75% (APR 5.25%*)

*The Annual Percentage Rate (APR) has been calculated based on a â‚Ź100,000 loan, with minimum contribution of 50%. It was calculated on 31/05/2014, with a 20 year repayment, arrangement fees of 1% and â‚Ź50 documentation fees, based on fixed interest rate 4.75% for 3 years period and variable interest rate 5.25% for the remaining period.

t ,OAN AMOUNT UP TO y t 2EPAYMENT PERIOD FROM TO YEARS WITH MAXIMUM AGE of applicant, the 65th year of age. t 'RACE PERIOD UP TO YEARS $URING THE GRACE PERIOD CLIENT IS LIABLE to pay monthly interest only. t #HOICE BETWEEN VARIABLE INTEREST RATE FOR THE ENTIRE PERIOD AND ĂŒR fixed rate for a 3 year period. After the fixed period ends, the loan will be priced with a variable interest rate. For more information on the loans, interest rates and full Terms & Conditions you may visit any of our branches.

W E D E L I V E R W H AT M AT T E R S www.usbbank.com.cy

|

8000 2323

The loan will be subject to further terms and conditions, included in the loan agreement and/or any other agreement that shall be executed between the Bank and the Customer in respect of the loan. The Bank reserves the right to reject any application for a loan at its discretion and may withdraw or modify the above loan offer at any given time. The approval of a loan is subject to the procurement of tangible and intangible collateral, including a mortgage or an assignment of the financed house, assignment of life and fire and earthquake policies and personal guarantees, which will be foreclosed and enforced in the event you fail to pay your loan installments. The interest rate and LOAN INSTALLMENT WILL DEPEND ON THE AMOUNT AND TERM OF THE LOAN AND MAY BE VARIED BY THE Â’ANK FROM TIME TO TIME 4HE "ANK RESERVES THE RIGHT TO CHANGE THE INTEREST RATE WITHDRAW OR ALTER THE PRODUCT AT ITS DISCRETION

INTERVIEW

five minutes with...

Christophoros Anayiotos Board Member and Advisory Services, KPMG

W

hy has there never been much Private Equity interest in Cyprus? Due to the abundance of the more ‘conventional’ forms of finance (bank debt) and maybe the reluctance of owners to surrender any kind of ownership or control, Private Equity (PE) has never been keenly sought after in Cyprus and has hence never been an active source of funding for helping businesses to grow here. From the perspective of PE houses, one can appreciate that neither the size of Cyprus’ economy nor the lack of exit routes through a liquid stock exchange were likely to motivate them to include Cyprus in their coverage area. The March 2013 bail-in of the banks in Cyprus undoubtedly placed the island at the centre of attention of financial news, globally. With the country already in recession, a number of PE and Venture Capital (VC) managers were intrigued by the potential investment opportunities that, inevitably, such situations bring about. What are they looking at? As one might expect, the first fund managers that we encountered were (are!) in search of distressed assets, either from the Cypriot banks or any sector of the economy, but these are generally highly correlated with the real estate industry and the significant lack of liquidity in Cyprus’ real economy.

THE OIL & GAS SECTOR WILL GENERATE NEW OPPORTUNITIES, WHETHER THESE ARE DIRECTLY IN THE FIELD OF EXTRACTION OR IN SUPPORT OR RELATED INDUSTRIES. Hopefully distressed assets are not the only area of interest? Fortunately, we do not have only troubled cases to present to them. Many of Cyprus’ businesses are still standing tall, even after that fierce hit to the economy. Nevertheless, they are in real need of liquidity or, in some cases, refinancing that will take them to the next phase. We can also consider the imminent and eminent privatisations. At least as regards the three main State Owned Enterprises (SOEs), we anticipate that their size ‘qualifies’ them to earn substantial interest for considerable funds to evaluate such an investment. Last, but definitely not least, the oil & gas sector will generate new opportunities, whether these are directly

14 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

in the field of extraction or in support or related industries. How do you see the immediate future? Many funds have already started visiting and even assessing potential targets in some cases. Their general observation that the economy is still stagnant does not help transactions proceed. Some ‘targets’ do not have the luxury of waiting much longer for that eagerlyneeded injection of finance. Others may consider that this gives them time to improve or a window for streamlining their business before they go to market. What role can KPMG play in the Cyprus market? Given our breadth and reach in the Cyprus market, we are perfectly placed to identify targets and, where applicable, utilise our network of member firms to search for potential funds from abroad. Already among the leading advisers in the world of private equity, KPMG’s PE team provides financial advisory services to management in raising PE funding for buyouts as well as a range of services to PE institutions, including buy-side advisory, add-on acquisitions for investee companies, and exits and disposals from their portfolios. PE is about a continuous cycle of fundraising, selected investment, portfolio management, and successful realisation.

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COVER STORY

LOOKING FOR FUNDS

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he investment funds sector in Cyprus is expected to become one of the major pillars of the country’s financial industry in the coming years. The Cyprus Investment Funds Association (CIFA) was established with the purpose of promoting the investment fund industry both at a local and international level. In an exclusive interview with Gold, CIFA President Angelos Gregoriades outlines the aims of the Association and explains what Cyprus needs to do in order to compete with other successful jurisdictions such as Malta and Luxembourg and to be considered a credible destination for funds and fund management.

By John Vickers, Photography by Jo Michaelides Cover photo by Jo Michaelides, taken at Porsche Center Cyprus (A.I. Motokinisi Ltd Headquarters)

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Gold: When was CIFA established? Angelos Gregoriades: CIFA was established in February 2013 and registered as an Association in April of the same year, upon the recommendation of an Expert Group appointed by the Board of Directors of the Cyprus Investment Promotion Agency (CIPA) to advise on matters related to investment funds. The establishment of CIFA may be seen as a natural development of the progress made thus far in promoting Cyprus as a com-

petitive investment funds jurisdiction. CIFA’s activities are further supported by the Ministry of Finance and the Cyprus Securities and Exchange Commission (CySEC). Gold: How would you describe CIFA’s mission? A.G.: Within the overarching goal of promoting the Cyprus funds industry and rendering Cyprus a competitive investment funds jurisdiction, CIFA also has a mission at a local level to (a) assist its members in the best utilisation of related interna-

tional trends and developments, (b) encourage professionalism, integrity and quality in the industry services being offered, and (c) shape regulation by contributing to and promoting the enactment of relevant legislation when required, in the light of regulatory developments in the EU as well as for improving Cyprus’ competitiveness. In addition, CIFA has established a Code of Conduct providing directors of Cyprus investment funds and asset managers with a framework of high-

level principles and best practice recommendations, such as ensuring proper disclosure to investors, acting fairly and independently in their best interests, and ensuring that high levels of corporate governance are applied at all times. Adherence to the Code of Conduct is not mandatory but it is recommended that it be confirmed in the annual financial statements of the fund or asset manager. Gold: How is CIFA structured? A.G.: The governing body of

IT IS IMPERATIVE THAT NEW LAWS AND AMENDMENTS ARE PROCESSED QUICKLY FOR CYPRUS TO BE COMPETITIVE WITH OTHER JURISDICTIONS

WHO’S WHO AT CIFA IOANNIS GAIGANIS (Vice President)

ANGELOS GREGORIADES (President) Angelos Gregoriades is Head of Tax and Corporate services of KPMG in Cyprus. He is a graduate of the London School of Economics and a Fellow Member of the Institute of Chartered Accountants of England and Wales. Gregoriades is a Member of the Board of Directors of the Cyprus Investment Promotion Agency (CIPA) and President of the Advisory Committee on Investment Funds. He has been involved extensively with the Tax Committee of the Institute of Certified Public Accountants in Cyprus (ICPAC). He is also currently serving as member of the Board of the Internal Audit Committee of the Government.

Ioannis Gaiganis is an expert professional in fund management and securities services. He is a member of the Alternative Investments Fund Managers Directive Committee and a Board Member of numerous Cyprus-domiciled Investment Companies as Principal for Red Fort Capital. Previously Gaiganis was a Director of the Fund Manager Beneficentia Ltd and headed the Investment Fund Services of Deloitte and KPMG in Cyprus. He started his financial career in Luxembourg where, from 1998 to 2009, he occupied senior positions at JP Morgan Fleming Asset Management, Fidelity Investments and Societe Generale Bank & Trust.

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CIFA is the 13-member Board of Directors, all of whom are highly reputable professionals experienced in all aspects of the industry, including fund management, administration, advisory, banking, audit and legal. CIFA has also established nine Technical Committees which analyse global industry developments as well as legal and regulatory changes in Cyprus, the EU and beyond. These Committees comprise industry participants with direct experience and expertise in the particular field who focus, among other things, on regulatory and

CYPRUS IS UNIQUELY POSITIONED TO PLAY A ROLE AS A NICHE MARKET OFFERING A COMPELLING ALTERNATIVE TO OTHER EU JURISDICTIONS

technical issues such as UCITS and Alternative Investment Funds as well as on market and operational matters, such as promotion and distribution, risk management, research and statistics, etc. The hard work of the members of these Technical Committees assists CIFA in ensuring that Cyprus remains at the forefront of related issues internationally while continuously expanding and updating its products to meet market needs. Gold: What is CIFA’s international stance? A.G.: Other than being the voice of the industry

MARIOS TANNOUSIS (Secretary)

Marios Tannousis is a Senior Investment Promotion Officer at the Cyprus Investment Promotion Agency (CIPA). He has twenty years of international corporate experience, with twelve years in the international banking and financial services group Société Générale, where he served in various key posts. Tannousis is a Board member of various organisations and bodies and he also served as President of the Cyprus Finance & Leasing Association. He holds a Bachelors degree in Economics and an MBA. He is also certified to offer investment services and has a special interest in Banking & Financial Services including Investment Funds.

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at a local level, CIFA also aims to represent the Cyprus investment funds sector in economic missions organised by the Government around the world, and to take an active part in the principal meetings of the global industry. In January, the Association filed an application to become a national member of an influential European Ιndustry Αssociation, and a presentation was subsequently made to its Board in April. The benefits of membership will include being represented at EU Commission level for all developments affecting the EU investment management industry as well as participating in discussions about key industry issues and the development of best practice recommendations.

Gold: Who are the current members and who can join CIFA? A.G.: CIFA has more than 80 registered members at present. Membership is available to both legal and natural persons originating from all sectors of the industry, including fund management, investment advisory, administration, banking, audit and legal. All pertinent information, including application forms, can be found on CIFA’s website at www.cifacyprus.org. Gold: Cyprus offers both EU-regulated Undertakings of Collective Investment in Transferable Securities (UCITS) and alternative investment funds. What can be done to attract more fund managers and management companies in the future? A.G.: Our legal framework

does indeed allow for the establishment of both UCITS and alternative investment funds. The latter, however, are currently restricted to private schemes (not to exceed 100 investors) governed under the International Collective Investment Schemes (ICIS) Law which has been in place since 1999. This law is due to be replaced imminently by the proposed Alternative Investment Funds (AIF) Law, which will provide for a significant modernisation of the related framework, making Cyprus largely competitive with other EU investment funds jurisdictions. Gold: What are the main aspects of the new law? A.G.: The proposed AIF Law will provide asset managers with a comprehensive tool box, intro-

CHRIS ODYSSEOS (Treasurer)

Chris Odysseos is a partner with PwC’s Global Compliance Services (GCS) practice which specialises in the provision of financial accounting, tax compliance and corporate governance services. He is in charge of the Funds Industry sector within the firm. Odysseos has over 20 years of experience, working with international clients across industry segments including Financial Services and Investment Fund Management, Consumer and Industrial Products and Pharmaceuticals. He began his professional experience with a ‘Big Four’ firm in Melbourne where he worked for 10 years before returning to Cyprus in 2002 to continue his career with PwC, becoming a partner in 2007.

ONE OF THE MAJOR CHALLENGES FACED BY THE CYPRUS FUNDS INDUSTRY IS THE LACK OF INTERNATIONALLY REPUTABLE BANKS OFFERING COMPREHENSIVE CUSTODY SERVICES ON THE ISLAND

ducing new structuring options which are not available under the current regime. Some of the most important developments include the ability to set up: • AIFs marketed to Professional Investors and/or Well-Informed Investors, comparable to the popular and well-established Specialised Investment Funds of Luxembourg, the Qualifying Investor Funds of Ireland and the Professional Investor Funds of Malta. • AIFs marketed to Retail Investors. • AIFs that may be listed on a recognized stock exchange, increasing their potential investor base while enhancing marketability and transparency. • AIFs with multiple investment compartments (i.e. Umbrella Funds). • AIFs set up as a Common Fund, a popular legal form in other jurisdictions used particularly for structuring investments of pension funds. In addition, amendments to the UCITS

framework are expected, in an effort to provide more flexibility for UCITS managers, particularly as this relates to the frequency of valuation, the means of publication of information to investors, and the eligibility of depositaries. Gold: Where does the law on alternative investment funds stand at present? A.G.: Cyprus has been in a transitional period for more than a year now, and any further delay could unfortunately result in fund managers and promoters choosing other jurisdictions for setting up their investment funds. It is imperative that new laws and amendments

are processed quickly for Cyprus to be competitive with other jurisdictions. We understand from our discussions with both the Government and regulatory authorities that the proposed law is at the final stages of review and is due to be enacted imminently. With this enactment Cyprus will have a complete framework for both investment funds – UCITS and AIFs – and their managers. Gold: The legal framework will undoubtedly help but, ultimately, won’t its success depend on how Cyprus uses it? A.G.: Yes, of course. These developments, coupled with the tax

efficiencies and competitive set-up and running costs of Cyprus, are expected to greatly expand the prospects of the industry on the island. The most important task, however, rests on all of us – CIFA, the Government and the regulatory authorities, as well as the private sector. We must all work collectively to market Cyprus and create awareness on a global scale by increasing our presence at relevant events and seminars. We also need to ensure that Cyprus remains at the forefront of industry matters, continuously modernizes its regulation, and actively promotes training, learning and high standards generally so as to firmly

THE DTT NETWORK SHOULD NOT ONLY BE EXPANDED TO INCLUDE NEW MARKETS OF INTEREST, BUT CERTAIN TREATIES WITH KEY MARKETS SHOULD BE RE-REVIEWED AND POSSIBLY RE-NEGOTIATED

establish the country as a jurisdiction of choice in Europe. Gold: How many International Collective Investment Schemes (ICIS) have been established in Cyprus? A.G.: According to the latest statistics released by the Central Bank of Cyprus in May 2014, the number of recognised ICIS is 100. It is important to note that more than 50% of these have only been established in the last four years and, furthermore, that the number of ICIS recognised to date in 2014 is almost as high as that of the whole of 2013. It is greatly expected that the enactment of the proposed AIF Law will allow Cyprus to emerge as a powerful alternative fund domicile in Europe. Indeed, we are confident that the efforts we are making will result in even faster growth than that experienced in recent years.

ANDREAS ATHINODOROU (Member) Andreas Athinodorou, B.Sc. (Hons), F.C.A. graduated with a degree in Business Economics and Finance from the University of Southampton, U.K. He qualified as a Chartered Accountant of the Institute of Chartered Accountants in England and Wales with PricewaterhouseCoopers. He specialized in Corporate Finance. He also worked with Arthur Andersen and as Group Finance Director in a number of companies in Cyprus. He is one of the founders and the Chief Executive Officer of the Aspen Trust Group. Athinodorou heads ATG Fund Services Ltd, the division of the Aspen Group that offers International Fund Administration Services.

CHRISTOFOROS ANTONIADES (Member)

CHARLES CHARALAMBOUS

Christoforos Antoniades is a Partner and Executive Director in the ARGUS group, which offers specialized investment services to international and local institutions and individuals. Its core activities include global execution & asset management, corporate finance, private equity and consulting services. ARGUS also runs other innovative operations including its own hedge funds. Antoniades has 23 years of experience in the investment management, investment banking and corporate finance fields. He has been actively involved in the assessment, evaluation & raising of capital for various funds, projects and companies, from startups to developed businesses, providing investment, advice and serving as member of their Board.

Charles Charalambous is Managing Director and Head of Wealth Advisory Services at Deloitte Investment Services Limited, providing investment advice to High-Net-Worth Individuals and corporates. He has over 17 years of financial industry experience with American and European broker-dealers and banks. Charalambous was previously Head of Investment Services at BNP Paribas Cyprus, providing advisory and brokerage services to HNWIs and institutions. Previously, he was the EMEA Regional Director with Westminster Securities Corporation. He is a Chartered MCSI and is a Chartered Member of the Chartered Institute for Securities & Investment (UK) where he has served as President of the Cyprus National Advisory Council since 2009.

(Member)

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COVER STORY

Gold: How significant was the transposition of the UCITS IV Directive in 2012 and the Alternative Investment Funds Managers Directive (AIFMD) in 2013? A.G.: The transposition of both Directives marked a milestone for the Cyprus funds industry ensuring that our legislative framework was in line with the relevant developments in Europe. The combination of the right legal framework together with the cost and tax benefits, but even more so the knowledge and expertise of our

service providers, make the island an attractive jurisdiction for the establishment of both such fund managers as well as UCITS funds. Gold: Let’s take the UCITS IV Directive first. A.G.: Despite the fact that UCITS legislation had been in place since 2004, the industry in Cyprus was dormant until the transposition of the UCITS IV Directive in 2012. Since then there have been two UCITS Management Companies and three UCITS funds authorised in Cyprus. However, one of the

CONSTANTINOS PAPANASTASIOU (Member)

Constantinos Papanastasiou has 15 years of experience in investment banking and currently serves as Head of Investment Banking at The Cyprus Investment & Securities Corporation Limited (CISCO). Papanastasiou is a member of the Board of Directors of Cyprus Airways Public Ltd and lectures for the CFA Programmes of the European University of Cyprus and the Cyprus International Institute of Management (CIIM). He formerly served as President of the CFA Society of Cyprus. He holds a Corporate Finance Qualification from the Institute of Chartered Accountants in England and Wales and is certified to provide advice on investments in financial instruments, underwriting, and portfolio management.

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restrictive factors is that, under the Directive, the depositary must be based in the home member state of the fund, and further to our local law, this must be a credit institution. The regulator is currently promoting amendments to the UCITS legislation to extend the eligibility requirement to other legal entities subject to capital adequacy requirements, prudential regulation and ongoing supervision. We therefore expect to see entities such as MiFID firms and others being appointed as depositaries of UCITS. The proposed amendments also include more flexibility around the valuation frequency (change to fortnightly from daily) and the publication of NAV, with the effect of reducing the operational costs of UCITS. These changes should assist in the growth of this industry in Cyprus.

Gold: And the Alternative Investment Funds Managers Directive (AIFMD) in 2013? A.G.: Cyprus was actually one of the first member states to transpose the Directive ahead of the EU deadline. The AIFMD introduces an EU passport for the raising of capital from professional/ institutional investors in the EU, which will not be available for third country domiciled funds and asset managers until a later stage. Many managers are currently considering a move from lightly regulated jurisdictions into the EU, and thus may consider establishing a presence or re-domiciling to Cyprus in order to benefit from this passport. This would alleviate them of the need to rely upon national private placement regimes to market their products in Europe. I should also note that the AIFM Law availed

of the possibility offered by the Directive and allows for a credit institution based in another EU member state to act as the depositary of alternative funds established in Cyprus and managed by an authorised AIFM (whether in Cyprus or another EU member state) until 22 July 2017. Following the transposition of both Directives, the requirement of strong governance over policies, procedures and documentation is a key element in all EU jurisdictions. Cyprus has the capabilities as a jurisdiction to assist fund managers in ensuring that they can demonstrate compliance with the related Directives by drafting documentation to a high standard. The challenge will lie in how to implement the requirements of the laws in a way that is conducive to generating business and which presents a balanced

WITH THE ENACTMENT OF THE PROPOSED AIF LAW, WE BELIEVE THAT CYPRUS WILL HAVE THE ABILITY TO MATCH THE GROWTH AND SUCCESS OF MALTA

CHARALAMBOS PHOKAS (Member) Charalambos Phokas has worked with Hellenic Bank since 1979. During his career he served in various posts including Branch Manager. In 1995 he joined the Organisation and Methods department and in 2000 he successfully organised the launch of the Custodian Services department which he has managed since then. In 2003 he was appointed General Manager of the Bank’s subsidiary, the Hellenic Bank Trust & Finance Corporation Ltd. Phokas has made a substantial contribution to the establishment of the custody concept in the Cyprus market and that of Custodians on the local Stock Exchange.

GEORGE ROLOGIS (Member)

OMIROS PISSARIDES (Member)

Omiros Pissarides is General Manager of the Axia Ventures Group, one of the region’s dominant investment banks. Prior to joining Axia, he was involved in the development and management of a portfolio which includes real estate, stock exchange and hospitality industry assets while, simultaneously, holding full-time managerial positions in Dubai, UAE. From 2005- 2008, he was Regional Channel Manager for Middle East, Africa and Pakistan of Nasdaqquoted Intermec Technologies and, from 2002-2005, General Manager of Logicom Dubai, heading operations across the GCC countries and Pakistan. Pissarides holds an Honours Degree in Economics and Accounting from Hull University and an MBA from Imperial College, London.

approach to compliance. Gold: The country’s tax treaty network is said to be one of the reasons why it has been successful in launching investment funds primarily into Russia and Eastern Europe. Can more be done in these markets or should we be trying to attract funds that have been set up for investment into other markets such as Asia? A.G.: The double tax treaty (DTT) network of Cyprus has helped greatly in promoting the Cyprus fund and asset management sectors in Russia and Eastern Europe. However, we have also had great success, especially recently, with significant markets in Asia including India and China. And although there is a clear benefit in continuing to promote Cyprus in these markets, it is of utmost importance to establish a more

global network, spanning a number of countries and continents, so as to give broader exposure to both the industry and the economy. Cyprus has an extensive DTT network including more than 45 treaties. However, other competitive markets – such as Luxembourg, Ireland and even Malta – have a greater number of treaties than us. We believe that the DTT network not only should be expanded to include new markets of interest, but also that certain treaties with key markets should be re-reviewed and possibly re-negotiated. Gold: You mentioned Malta, which is very similar to Cyprus in many ways and yet it has developed an extraordinarily large funds industry in the space of a few years. What has held Cyprus back and is the island now on the right

George Rologis is Group Head of Strategy and Country Executive of Cyprus at Alter Domus. He began his professional career in London with Credit Suisse First Boston in the European M&A Group, working predominantly with financial sponsors on European buyouts. He subsequently spent time with JPMorgan’s M&A team and joined Compass Partners International LLP, a European LBO fund focusing on investments in the Industrials and Services space. More recently he joined Dubai International Capital’s Private Equity Team in London where he also focused on European LBOs. Rologis holds a BSc in Economics from University College London and an MBA from the London Business School.

track to emulate and overtake Malta? A.G.: Malta’s success is likely due to the following key drivers: (i) a pragmatic regulatory environment and legal framework, which is continuously being upgraded and promotes an efficient process of authorisation; (ii) a regulator that is proactively involved in promoting the industry along with the direct involvement of Government Ministers; (iii) a lower cost of operations compared to other centres such as Luxembourg and Ireland; (iv) a tax-efficient regime; and (v) the presence of international service providers, especially in the fields of fund administration and custody. With the enactment of the proposed AIF Law, we believe that Cyprus will have the ability to match the growth and success of Malta considering the similarities in our tax, statutory and regula-

EVEN THOUGH WE ARE COMPETITIVE, WE DO NOT EXPECT AT THE FIRST STAGE TO ATTRACT BIG BUSINESS AWAY FROM LUXEMBOURG OR IRELAND

tory framework as well as our legal system (which is also based on common law) and the offering of equivalent benefits. Indeed, Cyprus is also competitive with Malta in setup and operational costs, as well as in the presence of internationally qualified service providers, especially in the legal, fund administration and audit sectors. Furthermore, Cyprus has the support of sophisticated infrastructure offering operational efficiencies. Admittedly, one limitation we need to address when compared to Malta is the minimal presence of international banks offering comprehensive custody services on the island. We should also note that Malta, like other jurisdictions, has established a strong nongovernmental association for funds which is tasked with the promotion and development of the sector as well as its representation

both locally and abroad. With the support of the Government, which has invested in the development of the financial sector, Cyprus has also done the same with the recent establishment of CIFA, which represents one more step in the right direction for promoting the growth of the industry. Gold: Regulatory power is currently shared between CySEC and the Central Bank. Won’t it make more sense for all funds to be brought under the supervision of the CySEC? A.G.: With the enactment of the proposed AIF Law the supervision of all investment funds (both UCITS and AIFs) and asset management entities (CIFs, UCITS Management Companies and AIFMs) will be under the auspices of CySEC. Concurrently, the supervision of all existing ICIS will be

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transferred under CySEC as well. This is seen as a positive development for the industry. CySEC, as a single regulator, will be able to look across the entire financial industry and allocate regulatory resources (both human and financial) where they are most needed. This will unify a broad set of regulatory activities, including asset management, investment services and collective investment schemes. In addition, CySEC has shown continuous commitment to creating a robust and energetic regulatory environment for financial services in Cyprus, while working closely with the private sector and being open to discussions and suggestions for improvement in the sector. CySEC promotes product innovation backed by sound and flexible regulation, with the

primary emphasis always being the protection of investors. Gold: Beyond waiting for the House of Representatives to approve the new AIF law, what are the main problems facing the industry and your members today? A.G.: One of the major challenges faced by the Cyprus funds industry is the lack of internationally reputable banks offering comprehensive custody services on the island. Indeed, branches of international banks operating in Cyprus are either not offering fund custody services at all or they are offering just a limited scope. It should be noted that locally-based banks hold a strong market share, servicing more than 60% of the registered ICIS. While the proposed AIF Law al-

lows for the appointment of a non-Cyprus-based depositary when not managed by an AIFM, in order to attract both AIFMs and UCITS management companies to establish funds in Cyprus, we shall need to strengthen the quality of the market players. For this it will be necessary to persuade internationally reputable credit institutions to establish a presence in Cyprus, while those already established could extend the scope of services offered. Another drawback is the current length of processing applications, which can take in some cases up to four or even six months. This will be remedied with the enactment of the proposed AIF Law, which mirrors the law transposing the UCITS IV Directive in imposing a time limit of two months from the date of complete file submission on the regulator during which to inform the applicant of its decision to grant the licence. It is also necessary for the regulator to be able to recruit more people as the industry expands in order to meet demands on a timely basis. Despite these issues, Cyprus remains an attractive jurisdiction for the set-up

of investment funds and/ or fund managers in light of its European status and the advantages this brings, its strategic position with proximity to the markets of the Middle East, CIS and Africa, as well as its modern regulatory regime and the numerous tax and cost benefits. Gold: Overall, what role do you see Cyprus playing in the international investment funds industry in the future? A.G.: Cyprus is uniquely positioned to play a role as a niche market offering a compelling alternative to other EU jurisdictions. This can be done by initially targeting asset managers and promoters of a smaller scale who can appreciate a jurisdiction of low cost, effectiveness and efficiency, which at the same time does not compromise the level of service quality. Our expectations are manageable – even though we are competitive, we do not expect at the first stage to attract big business away from Luxembourg or Ireland – and we anticipate strong but steady growth in the coming years. Once we have made the first inroads into attracting more international players to

Cyprus, our reputation will improve and in due course more reputable market players will follow. But in order to do so, as I have previously mentioned, we must work hard on a collective level to effectively promote the benefits of Cyprus in key international markets and further ensure that we continuously upgrade our product and service quality on all fronts. For this to succeed, CIFA needs to increase its membership with others who will support this important marketing effort. In this regard, on behalf of the Board of CIFA, I would like to take this opportunity to express our gratitude and appreciation to all parties involved – especially the Government and the regulatory authorities – for their continued commitment thus far in the efforts to promote the establishment and growth of the industry in Cyprus, and for taking the initiative when required to identify possible solutions and means for enhancing our product offering, while not compromising the protection of investors. We look forward to continuing our hard work with all parties involved over the next few years.

DEMETRIS TAXITARIS (Member) Demetris Taxitaris is a co-founder and Managing Director of Symmetria F.S. Ltd, a financial advisory, research and analysis firm. From 2001- 2013, he worked in asset management with CISCO, Bank of Cyprus Group in Nicosia, from where he resigned as Head of Asset Management. Prior to that, he worked in Deloitte in London where he qualified as an Associate Chartered Accountant. Taxitaris is a member of the Board of the Institute of Certified Public Accountants of Cyprus (ICPAC). He is an instructor on courses for the European regulatory framework for investments, covering fields such as MiFID, UCITS, AIFMD, ICIS, Market Abuse and Transparency.

ANDREAS YIASEMIDES (Member) Andreas Yiasemides is a Principal of Fiduserve Fund Services, a member of the Board of the Bank of Cyprus Group, and Chairman of the Cyprus Investment and Securities Corporation Ltd (CISCO). Yiasemides previously worked for Bank of Cyprus in various posts, including corporate officer in Bank of Cyprus Romania, part of the credit risk group of Bank of Cyprus Nicosia and, most recently, Head of the Custody and Trust department. He started his career in the Audit department of PricewaterhouseCoopers having obtained his BA (Econ.) in Accounting, Finance and Economics from the University of Manchester and qualifying as a Chartered Accountant.

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yprus is one of the fastestgrowing investment fund centres in Europe, thanks to the legal and regulatory framework that has been put in place to facilitate the establishment and management of alternative investment funds and venture capital investment funds. By being in line with all the latest EU

regulations relating to UCITS, Alternative Investment Funds and their Managers, Cyprus is today a uniquely competitive entry point to EU regulated fund management solutions. On the following pages, eleven key players present their services and L_WLY[PZL VɈLYLK [V [OL PU]LZ[TLU[ funds industry.

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Alter Domus quirements of legal structures established by our clients in each of the jurisdictions in which we operate.

George Rologis, Country Executive Cyprus

*VTWHU` 7YVÄSL Alter Domus is a leading global provider of Fund and Corporate Services, dedicated to private equity houses, real LZ[H[L ÄYTZ T\S[PUH[PVUHSZ private clients and private debt managers.Independently owned by current management since 2003, Alter Domus has continually expanded its global service offer and today JV\U[Z VMÄJLZ HUK KLZRZ across four continents. Our 650 employees provide strong expertise across the entire value chain of investment structures: from fund administration to corporate services. We offer outsourcing solutions for middle and IHJR VMÄJLZ PUJS\KPUN [OL implementation of structures, investor relations, investment processing, accounting, tax, regulatory and compliance re-

Key factors to our success include a central point of contact who expertly manages our client relationship across jurisdictions, experienced local operational teams and a cutting-edge globally integrated IT system. A substantial amount of our revenue is derived from the alternative fund industry and our dedicated Fund Services Teams have HU PU KLW[O RUV^SLKNL VM [OL global technical and operational issues that are necessary to support expectations from both general and limited partners.

:LY]PJLZ 7YV]PKLK Alter Domus has traditionally had strong accounting, ÄUHUJPHS YLWVY[PUN HUK H\KP[ SPHPZVU ZRPSSZ ;OL ZJVWL VM our fully-integrated Corporate Services includes: company formation and liquidation, corporate secretarial services, daily administration and management, accounting and tax compliance. We also provide independent directors for the companies we administer. Alter Domus has dedicated

24 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

teams focusing on private equity, infrastructure, real estate and hedge fund clients. With over 70% of our revenues derived from the alternative investment fund industry, we have gained an in-depth RUV^SLKNL VM [OL NSVIHS [LJOnical and operational issues that are necessary to support expectations from both general and limited partners.

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Alter Domus has over $42 billion of assets under administration (AUA) for Fund Administration Clients. We are proud to serve 17 out of the 30 largest Private Equity houses, 16 of the 30 largest 9LHS ,Z[H[L ÄYTZ HUK VM [OL 10 largest Private Debt Managers in the world. Alter Domus is the only global fund administrator with an active and highly experienced execution team based in Cyprus, capable of servicing and adding value to all of the Investment Manager’s needs. The Cyprus funds team is part of the global Alter Domus -\UKZ [LHT ZOHYPUN RUV^Sedge, best practices and our OPNOS` LMÄJPLU[ HUK JHWHISL 0; platforms to cater for our client’s needs.

CONTACT INFORMATION

Alter Domus 5, rue Guillaume Kroll, L-1882 Luxembourg Tel: (+352) 4818281 Fax: (+352) 481863 Alter Domus (Cyprus) Ltd 11, Limassol Avenue, Galatariotis Building, 2112 Nicosia Tel: (+357) 22465151 Fax: (+357) 22379379 Website: www.alterdomus.com Country Executive Cyprus: George Rologis e-mail: George.Rologis@ alterdomus.com

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SPECIAL SUPPLEMENT

Bank of Cyprus Group .YV\W 7YVMPSL -V\UKLK PU )HUR VM Cyprus Group is the leading IHURPUN HUK ÄUHUJPHS ZLYvices group in Cyprus. The Group provides a wide range VM ÄUHUJPHS WYVK\J[Z HUK ZLYvices which include retail and JVTTLYJPHS IHURPUN ÄUHUJL MHJ[VYPUN PU]LZ[TLU[ IHURPUN IYVRLYHNL M\UK THUHNLTLU[ WYP]H[L IHURPUN SPML HUK general insurance. The Group operates through a total of 300 branches, of which 164 operate in Russia, 130 in Cyprus, 1 in Romania, 4 in the United Kingdom and 1 in the ChanULS 0ZSHUKZ )HUR VM *`WY\Z also has 5 representative ofÄJLZ PU 9\ZZPH <RYHPUL *OPUH HUK :V\[O (MYPJH ;OL )HUR of Cyprus Group employs 6,898 staff worldwide. As at 31 March 2014, the Group’s Total Assets amounted to ₏29.4 billion and Total Equity was ₏2.7 billion.

>LHS[O )YVRLYHNL (ZZL[ 4HUHNLTLU[ +P]PZPVU ;OL )HUR [OYV\NO P[Z >LHS[O )YVRLYHNL (ZZL[ 4HUHNLment Division, which includes 7YP]H[L )HURPUN 7) 0UZ[Ptutional Wealth Management 0>4 0U]LZ[TLU[ )HURPUN Asset Management, Global )YVRLYHNL HUK .SVIHS *\Z[VK` Services, offers a wide range of products and services that cater to the investment inK\Z[Y` ;OL )HUR JHU WYV]PKL services to the fund industry [OYV\NO P[Z IYVRLYHNL HZZL[

management and global custody services.

.SVIHS *\Z[VK` :LY]PJLZ The Global Custody Services VM )HUR VM *`WY\Z HYL WYV]PKed through the Custody and ;Y\Z[ * ; KLWHY[TLU[ MVY Änancial instruments locally and PU[LYUH[PVUHSS` * ; JH[LYZ [V the needs of the institutional and private clients of the Institutional Wealth Management HUK 7YP]H[L )HURPUN KP]PZPVUZ to clients solely requiring custody services, as well as to Cyprus Investment Firms (CIFs) and investment funds Z\JO HZ <UKLY[HRPUNZ MVY *VSlective Investments in Transferable Securities (UCITS) and non-UCITS. ;OL )HUR JVVWLYH[LZ ^P[O high quality international sub-custodians, where the ZHMLRLLWPUN VM JSPLU[Z HZZL[Z [HRLZ WSHJL PU ZLWHYH[L accounts, clearly segregated MYVT [OL HZZL[Z VM [OL )HUR ensuring the ring-fenced nature of protection provided to clients The Global Custody Services offered consist of: • :HMLRLLWPUN VM ÄUHUJPHS PUstruments. • Clearing and settlement of transactions, and daily reconciliations. • Reporting on clients’ assets, provided in a customised format and frequency. • Corporate actions monitoring, and communicating to

28 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

clients and processing in a timely fashion. • Proxy-voting services. • Tax processing of tax at source, according to the applicable double tax treaty. )HUR VM *`WY\Z YLJLU[S` YLceived the prestigious award as “The Best Sub-Custodian )HUR š PU *`WY\Z MYVT the international publication Global Finance.

.SVIHS *\Z[VK` :LY]PJLZ MVY 0U]LZ[TLU[ -\UKZ The Cyprus investment funds industry is at its development stage, serving mainly private ZJOLTLZ RUV^U HZ 0U[LYUHtional Collective Investment Schemes (ICIS), and a number of UCITS. Cyprus is continuously addressing the factors that are important to asset managers in choosing a fund domicile, such as the approach to fund regulation, accessibility to the regulator, the cost of doing business, the tax treatment of funds and double tax treaties, and the service culture. ;OL )HUR J\YYLU[S` HJ[Z HZ custodian for a number of local ICIS and can serve as custodian for UCITS and other non<*0;Z WYVK\J[Z ^PKLS` RUV^U as Alternative Investment Funds (AIF). ;OL )HUR JHU VMMLY NSVIHS custody services to AIFs, in its capacity as depositary as required by the applicable leg-

islation, where it will carry out the following functions: a) :HMLRLLWPUN VM [OL HZZL[Z VM the AIF, comprising both custoK` MVY ÄUHUJPHS PUZ[Y\TLU[Z HZ well as maintaining up-to-date YLJVYKZ VM V^ULYZOPW ]LYPÄJHtion for other assets. b) *HZO ÅV^ TVUP[VYPUN c) Oversight duties – ensuring compliance with the law in relation to transactions such as redemptions and subscriptions, the valuation of units of the AIF, investment restrictions and leverage limits, the timely settlement of transactions and the AIF’s income distribution. ;OL )HUR JHU HJ[ HZ KLWVZP[HY` for UCITS with duties comprisPUN VM ZHMLRLLWPUN VM [OL HZsets in which the UCITS invest in, and oversight duties similar to those described above.

CONTACT INFORMATION

Bank of Cyprus Public Company Ltd 51 Stassinos Street, Strovolos, P.O. Box 21472, 1599 Nicosia P.O. Box 21472, 1599 Nicosia WEALTH, BROKERAGE AND ASSET MANAGEMENT OFFICES: 154, Limassol Ave., 2025 Strovolos, Nicosia Tel: (+357) 22121881 Fax: (+357) 22378970 e-mail: wealth@ IHURVMJ`WY\Z JVT Website: ^^^ IHURVMJ`WY\Z JVT

SPECIAL SUPPLEMENT

B

BDO Ltd

DO Ltd is amongst the largest professional ser]PJLZ Ă„YTZ in Cyprus, employing over 100 professionals providing audit, tax, accounting, global compliance and advisory services, predominantly to International clients in all areas of business activity.

tise and technical resources of H ^VYSK^PKL UL[^VYR [V WYVvide effective and relevant advice to the highest standards. Our Fund services department specializes in providing fund advisory services, administration and support services enabling our clients to set up and manage regulated funds anywhere in the EU.

We have been a member of BDO International Ltd since )+6ÂťZ NSVIHS UL[^VYR provides advisory services in 144 countries, with over WLVWSL ^VYRPUN V\[ VM TVYL [OHU VMĂ„JLZ worldwide. We have demanding client service standards [OH[ HSS V\Y Ă„YTZ T\Z[ TLL[ and we trust and empower V\Y WLVWSL [V \ZL [OLPY ZRPSSZ and experience to deliver the exceptional service that global clients expect.

• Establishment of regulated Alternative and UCITS funds anywhere in the EU • Establishment of regulated fund management companies and alternative investment fund management companies and advising throughout the licensing procedure • Assisting in the drafting of the necessary procedures manuals to comply with the relevant laws and regulations • Advising to ensure compliance with the applicable UCITS management company and AIFM Laws • Coordination of Securities Services Providers and other outsourcing solutions • Drafting of the prospectus • Preparation of business plans

Our distinctive reputation for building close personal relationships with our clients is based on our commitment to HSS V\Y Z[HRLOVSKLYZ [OH[ ^OH[ matters to them matters to us. >L ^VYR ^P[O V\Y JSPLU[Z [V KLĂ„UL ^OH[ L_JLW[PVUHS JSPLU[ service means to them and we aim always to bring insight and \W [V KH[L [OPURPUN [V OLSW them meet their objectives. )+6 UL[^VYR Ă„YTZ JVTIPUL [OLPY PU KLW[O [LJOUPJHS RUV^Sedge and expertise of the local THYRL[ ^P[O [OL ZWLJPĂ„J L_WLY-

0UJVYWVYH[PVU SERVICES

(KTPUPZ[YH[P]L (NLU[ • Accounting for all transactions and movements • Portfolio valuations • Reconciling portfolios and accounting records with the service providers involved • *OLJRPUN PU]LZ[TLU[ YLZ[YPJtions

30 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

• Maintaining, storing and archiving accounting data • Calculating taxes and levies • Calculating and publishing net asset values • Liaising with external auditors • 7YLWHYPUN JVUZVSPKH[LK ÄUHUcial statements in accordance with the accounting standards required • Preparing and sending out ÄUHUJPHS HUK SLNHS YLWVY[Z

9LNPZ[YHY (NLU[ • Maintaining shareholder registers • Registering and performing transactions (subscriptions, redemptions, conversions, transfers and distributions) • Settling and monitoring transactions • Convening shareholders to annual general meetings and issuing other communications • Applying the anti-money laundering and counter-terrorPZT ÄUHUJPUN (43 Y\SLZ HUK control procedures 0KLU[PM`PUN JSPLU[Z 2@* YPZR management)

+VTPJPSPH[PVU HUK *SPLU[ *VTT\UPJH[PVUZ (NLU[ • 9LNPZ[LYLK VMÄJLZ • General secretariat and administrative management • Correspondence management • Organizing board and shareholder meetings • 4HUHNPUN UV[PÄJH[PVUZ notices, and legal announcements • Managing invoices

• Maintaining, storing and archiving documents • Managing the secure access [V JVUÄKLU[PHS KH[H • Assisting you to identify JVYWVYH[L VMÄJLYZ ^P[O [OL YLSevant experience BDO Fund Services Ltd, a Cyprus limited liability company, is a subsidiary of BDO Ltd and a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international )+6 UL[^VYR VM PUKLWLUKLU[ TLTILY ÄYTZ )+6 PZ [OL brand name for the BDO net^VYR HUK MVY LHJO VM [OL )+6 Member Firms.

CONTACT INFORMATION

BDO Fund Services NICOSIA Antonis Zanios Tower, 1, Erechthiou Street, Engomi, Nicosia PO Box 25277, CY2413, Nicosia Tel: (+357) 22495707 Fax: (+357) 22495717 e-mail: nicosia@bdo.com.cy Contact: Karlos Zangoulos LIMASSOL (SWOH ;V^LY [O Ă…VVY (YJO 4HRHYPVZ 000 (]L Limassol PO Box 51681, CY3507, Limassol Tel: (+357) 25735450 Fax: (+357) 25735455 e-mail: limassol@bdo.com.cy Contact: Rois Potamitis Website: www.bdo.com.cy

SPECIAL SUPPLEMENT

CyproFund Administration Services Ltd

C

yproFund Administration Services Ltd (“CyWYV-\UKš H TLTILY of the Cyproman group of companies, has been dedicated to providing comprehensive fund administration and accounting services to private investment funds, both local and international, for the last 15 years. The management and staff of CyproFund have acquired extensive experience in all phases of fund administration and compliance, allowing CyproFund to provide invaluable advice and counsel on all sorts of operational and administrative questions as they arise, as well as assist with the necessary valuation of assets. CyWYV-\UK OVSKZ [OL THYRL[ÂťZ SLHKPUN position, acting as administrator in a number of International Collective Investment Schemes (ICIS) – the local alternative investment fund scheme recognized by the Central )HUR VM *`WY\Z Recently, CyproFund has joined MVYJLZ ^P[O 0-: H SLHKPUN Ă„YT VWerating from Mauritius and licensed by the local Financial Services Commission, by entering into a strategic collaboration agreement, which is aimed at better serving *`WYV-\UKÂťZ JSPLU[Z I` [HRPUN advantage of any cross-border capabilities, strengthening and KLLWLUPUN ZRPSSZ PU THU` Q\YPZKPJtions, gaining further expertise, as well as by enhancing its service offering using a specialized IT infrastructure. CyproFund services a broad array of investment products, including mutual funds, private equity funds, partnerships and commingled trusts. It ensures the accurate and timely release of fund NAV on any frequency (monthly, half-yearly and / or yearly), utilizes updated software to process client infor-

mation in the most reliable manner, and has extended reporting capabilities with a high degree of tailoring. Additionally, CyproFund offers a complete fund accounting solution, servicing a wide array of investment vehicles and fund structures with customized, fullZLY]PJL IHJR VMÄJL Z\WWVY[ The choice of an administrator is a critical decision in the service provider selection process and *`WYV-\UK PZ ]LY` JVUÄKLU[ [OH[ it can consistently meet, as well as exceed, a client’s expectations both at the onset and on an ongoing basis.

:LY]PJLZ 7YV]PKLK -<5+ (**6<5;05. • Maintenance of multi-currency accounting records • Calculation of all fund-related fees (including performance fees and equalization) • Calculation and disbursement of income and dividend distributions • Preparation of portfolio valuation reports • Calculation and targeted communication of NAV per share and other entitlements • Audit assistance • Assistance in the preparation of PU[LYPT HUK HUU\HS ÄUHUJPHS Z[H[Lments • 7YLWHYH[PVU HUK ÄSPUN VM YLWVY[Z and returns with the regulators • Management of the custodian’s orders to pay or deposit cash and securities.

(**6<5;05. (5+ =(3<(;065 • Tailor-made Accounting (including FIFO, LIFO, Costs Accounting, Partnership Accounting, International Accounting Standards) • Multiple price sourcing and reconciliation

32 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

• Consolidated reporting

(.,5*@ (5+ *69769(;, (*;065 • Issuance, transfer, allotment, conversion, redemption and/or purchasing of units/shares in accordance with the Articles and the instructions of the client, and updating the register • Preparation and issuance of cheques for dividend payments or payments of redemptions and notiÄJH[PVU VM ZOHYLOVSKLYZ • Management of reception, recording and dealing of letters of administration, powers of attorney, dividend mandates, vesting orders, notices of change of names and other documents affecting the title to shares or any dividends payable, and consequently updating the register • Maintenance of company acJV\U[Z HUK ÄUHUJPHS YLJVYKZ HZ required by law and proper conduct rules of the company • Processing of Subscriptions and Redemptions Deal with complex legal structure functionality.

*69769(;, (5+ TRUSTEE SERVICES ;OYV\NO *`WYV-\UKZ HMÄSPH[LK companies, the Cyproman group of companies also provides the following administrative services: • Corporate secretarial support • Attendance of board meetings and general meetings of the company • Dispatch of all such circulars, notices of meetings, reports and ÄUHUJPHS Z[H[LTLU[Z • Proxy agent services for shareholder meetings, receipt and tabulation of votes cast by proxy and reporting of results • Provision of independent directors • 9LNPZ[LYLK VMÄJLZ

• Regulatory reporting • Trustee Services.

*64730(5*, (5;0 465,@ 3(<5+,905. (43 ;OYV\NO *`WYV-\UKZ HMÄSPH[LK companies, the Cyproman group of companies also provides comWYLOLUZP]L *VTWSPHUJL (U[P Money Laundering services on an outsource basis. ( [LHT VM X\HSPÄLK WYVMLZZPVUals can provide comprehensive Compliance and Anti Money Laundering Services to Investment Firms and other professional legal entities (such as ICIS and UCITS). *VTWSPHUJL VMÄJLYZ ^P[O HU L_[LUsive experience are continuously updated with the latest directives to support high quality compliance and AML practices of exceptional standards. *`WYV-\UKZ HMÄSPH[LK JVTWHUPLZ offer a range of outsourced compliance services aiming to reduce the I\YKLU VM PU]LZ[TLU[ ÄYTZ ^OPSL managing the compliance cost LMÄJPLU[S`! • Compliance Support Services • *VTWSPHUJL 6MÄJLY HWWVPU[TLU[Z • Compliance Advisory Services

CONTACT INFORMATION

CyproFund Administration Services Ltd 12, Esperidon Street, 4th Floor, CY-1087 Nicosia Tel: (+357) 22474000 Fax: (+357) 22474808 Contact: Andreas Loizou, Senior Manager Direct Line: (+357) 22474868 e-mail: aloizou@cyprofund.com.cy

Special supplement *:9

Deloitte Investment Services Limited

Investment Advisory Services Winning with clients Deloitte Investment Services Limited (“DIS”) provides independent advisory services to ultra-high net worth and high net worth individuals, wealthy families and mid-market institutions. The organisation’s services are focused on investment advisory services, investment manager search and selection and on-going investment manager performance monitoring, regular reporting and face-to-face meetings, keeping the clients truly informed of the progress of their portfolio. Moreover, Deloitte Investment Services serves both as a unique, full-service multifamily office and as advisors to newly formed and mature family offices.

D

eloitte’s key strength is its independence, which enables it to offer fee-based investment advice to clients. Deloitte works with clients on an on-going basis assisting them in achieving their long-term goals. In developing financial plans, Deloitte reviews existing investments, clients’ short-term and long-term goals, attitude to risk and their individual circumstances. In short, Deloitte offers a unique service. Deloitte is one of the largest and fastestgrowing professional services organisations in Cyprus, providing audit, tax, consulting and financial advisory services through more than 500 people from offices in all major cities with the valuable support of the 200.000 people of our global organisation in over 150 countries. Why we are different A wealth of expertise For wealthy families, entrepreneurs, professionals and executives alike, expert advice on investment, financial planning and tax issues is crucial to protecting and maximising personal wealth. Our Private Client Services team specialise in providing just such advice. A broader perspective With strong connections with our Deloitte colleagues throughout the world, our team possesses a breadth of international experience and technical expertise that few others can lay claim to. We understand the complexities of the tax, investment, pension and estate planning, even on an international scale. This enables us to see the big picture and means we can offer an integrated approach that - quite simply delivers more for our clients. Smarter thinking Our professional resources are matched by a mind-set that strives for excellence. We are proud of our ability to think innovatively and to develop tailor solutions that work, not just

technically, but also commercially too. We don’t sell “standard designs”, preferring to understand each client’s objectives. We believe this delivers truly independent advice that helps our clients meet the challenges of a constantly evolving financial environment and realise their goals. Full Range of Advisory Services We offer a unique service. Our professionals have the ability to provide you with an investment plan which includes financial and planning strategies and provide a complete integrated wealth management solution.

In summary our services include: u Investment Advice and Financial Planning u Investment Consulting, Investment Manager Search and Selection and Performance Monitoring u Family office u Wealth Advisory u Corporate Investments So who are we and what makes us so special? u We are an integral part of the Deloitte global network which employs 200,000 professionals across 150 locations around the world. Deloitte is a multidisciplinary practice, employing not just accountants and tax experts but investment specialists, pension specialists, human resources consultants, corporate financiers, actuaries, economic modellers, surveyors and more. Within the Deloitte network you can find every kind of financial expert you should ever need. u We are independent. There seems to be no shortage of people willing to provide financial advice these days but it can be difficult to know who to trust. It is easy to be bamboozled into buying a financial product which is inappropriate because the seller is on a commission or tied to a particular provider. With us, you can be entirely confident that the advice we give you will be strictly objective.

In short, we offer a unique service. We have the resources and capabilities to deal with all aspects of your financial affairs under one roof and to look after you and your family’s finances on a long-term basis. We like to think that for our clients we become their family finance director, someone who can be relied upon to see that their financial affairs are always in order. Contacts For more information about Deloitte’s Investment Services, please contact: Christis M. Christoforou Chief Executive Officer Tel: + 357 22360300 cchristoforou@deloitte.com Charles P. Charalambous, Chartered MCSI Managing Director Tel: + 357 22360627 ccharalambous@deloitte.com Deloitte Investment Services Limited Head Office 24 Spyrou Kyprianou Avenue, CY-1075 Nicosia, Cyprus Limassol Branch Maximos Plaza, 213, Arch. Makariou III Avenue, CY-3030 Limassol, Cyprus E-mail: cydis@deloitte.com For further information, visit our website at www.deloittewealth.com Deloitte Investment Services Limited is regulated by the Cyprus Securities and Exchange Commission (CySEC). Every investment involves risk. Past performance is not necessarily a guide to the future. The value of investments may fall as well as rise and you may not get back the amount invested. Income from investments may fluctuate in value. Historical information and financial-market scenarios are no guarantee for future performance. Investments in foreign currencies involve the additional risk that the foreign currency might lose values against the investor’s reference currency.

SPECIAL SUPPLEMENT

F

orticap is a newlyestablished, EU-regulated UCITS Fund Management and Alternative Investment Fund Management Company. Our model is to operate as an open architecture structure, enabling third parties to launch and manage their own ‘dedicated’ Alternative Investment Funds and UCITS funds. We are a ‘plug and manage’ solution, enabling access [V THYRL[ MVY M\UK PUP[PH[VYZ Wealth Managers, Family OfÄJLZ -PUHUJPHS (K]PZVYZ 7SHUners and Entrepreneurs. We cater to all asset classes from listed equities to hedge funds, private equity and real asset funds including real estate. -\UK KL]LSVWLYZ ILULÄ[ MYVT cost-effectiveness through LJVUVTPLZ VM ZJHSL IHJR VMÄJL Z\WWVY[ HKTPUPZ[YH[PVU and capital raising services for the establishment, operation and growth of regulated funds.

0UJVYWVYH[PVU We don’t just write your prospectus. We identify with you the fund type and jurisdiction that is appropriate for your objectives. We review your investment strategy, policy and management to establish a robust fund that will not require corrective measures after launch. We ensure that your

Forticap regulatory setup supports your distribution plans. Operations HYL VW[PTPaLK YLÅLJ[PUN [OL PTWVY[HUJL VM LMÄJPLU[ ÅV^Z ^P[O [OL J\Z[VKPHU IHUR [OL administrator and the registrar.

9LN\SH[LK 0U]LZ[TLU[ 4HUHNLTLU[ :LY]PJLZ We offer day-to-day management, regulatory compliance HUK YPZR THUHNLTLU[ VM `V\Y +LKPJH[LK -\UK >L M\SÄS RL` YVSLZ PU YPZR HUK PU]LZ[TLU[ compliance, allowing you to focus on the investment process of your fund. As long as the fund operates within the applicable rules, our role is to monitor, measure and support, not interfere.

*\Z[VK` >L ^VYR ^P[O ZLSLJ[LK J\Z[VKPHU IHURZ [OH[ KLSP]LY [OL solutions your fund needs. The custodians with whom we cooperate are selected on their ability to answer complex YLX\PYLTLU[Z VM ZHMLRLLWing, controls and reporting. We can accommodate any custodian or sub-custodian of your choice as long as they operate within agreed quality parameters.

(KTPUPZ[YH[PVU 9LNPZ[YHY HUK ;YHUZMLY (NLUJ` :LY]PJLZ We cooperate with top-quality fund service providers using state-of-the-art systems for fund administration, registrar and transfer agent services.

36 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

We are also able to accommodate your own selection of fund administrator based on quality selection criteria.

:LJ\YP[PLZ 3LUKPUN Having access to solutions that allow you to borrow or lend securities can optimize your fund’s liquidity and perMVYTHUJL >P[O V\Y IHURPUN partners we bring you solutions in liquidity management and securities lending/borrowing.

0ZZ\LY :LY]PJLZ 3PZ[PUN 076 In the context of your fund or as a standalone requirement, we deliver complete debt structuring solutions through PU[LYUH[PVUHS IHURZ -VY WYPJL listing only or public trading, we arrange for your fund or debt instrument listing on a Z[VJR L_JOHUNL YLSL]HU[ [V your objectives. We assist you in all steps of an IPO, covering eligibility analysis, investment IHUR JVU[YHJ[PUN HUK THYRL[ entry.

7YVTV[PVU HUK +PZ[YPI\[PVU :\WWVY[ ;OL HIPSP[` [V YLHJO [OL THYRL[ of fund investors is one of the competitive advantages that we bring to your fund. We assist in the promotion of your fund with cooperating investment platforms, advisors, insurance companies, WYP]H[L IHURZ HUK PUZ[P[\[PVUHS investors. We cover elements of corporate branding and

promotional material including presentations, fund sheets, IYVJO\YLZ HUK ^LI THYRL[PUN

+VTPJPSPH[PVU HUK *VYWVYH[L :LY]PJLZ We arrange for the provision of quality domiciliation and corporate services including: • 9LNPZ[LYLK VMÄJLZ • Secretary and administrative management • Correspondence management • Organisation of board/shareholder meetings • 4HUHNLTLU[ VM UV[PÄJH[PVUZ notices/legal announcements • Management of expenses • Maintenance, storage, archiving and destruction of documents • Management of secure acJLZZ [V JVUÄKLU[PHS KH[H • 0KLU[PÄJH[PVU VM JVYWVYH[L VMÄJLYZ ^P[O YLSL]HU[ L_WLYPLUJL Forticap is the commercial UHTL VM -VY[PÄLK *HWP[HS 3PTited, a company registered in Cyprus under registration no HE327912 and pending authorization from the Cyprus :LJ\YP[PLZ ,_JOHUNL *VTmission.

CONTACT INFORMATION

Forticap Ltd Antonis Zenios Tower, 1 Erechthiou Street, 2413 Engomi, Nicosia Tel: (+357) 22367610 Mobile: (+357) 99220190 Fax: (+357) 22495717 e-mail: info@forticap.eu Website: www.forticap.eu Contact: Ioannis Gaiganis

Fund Services Practice KPMG in Cyprus has been actively involved in the funds industry, serving local and international clients for more than 15 years. We operate through fully integrated teams that include professionals across our Audit, Tax and Advisory practices, combining a wide range of skills and experience tailored to meet the individual requirements of our clients. In our commitment to better meet the increasing industry demands, we continue to invest in our people and expand on our services. Our Fund Services practice is a market leader in Cyprus: t Holding the largest local investment fund audit market share; t )BWJOH FYQFSUJTF JO UIF TFU VQ BOE BVUIPSJTBUJPO of investment funds – both alternative investment funds and Undertakings for Collective Investment in Transferable Securities (UCITS); t )BWJOH FYUFOTJWF FYQFSJFODF JO UIF BVUIPSJ[BUJPO PG $ZQSVT *OWFTUNFOU 'JSNT $*'T BOE NPSF recently becoming involved in the asset management sector with UCITS Management $PNQBOJFT BOE "MUFSOBUJWF *OWFTUNFOU 'VOE .BOBHFST "*'.T t "DUJOH BT BVEJUPST PG B OVNCFS PG $ZQSVT CBTFE JOWFTUNFOU GVOE BENJOJTUSBUPST BOE DVTUPEJBOT VUJMJ[JOH BNPOH PUIFST DPNQVUFS CBTFE automated audit tools. ,1.( QSPGFTTJPOBMT BSF EFFQMZ FYQFSJFODFE JO UIF JTTVFT USFOET BOE SJTLT SFMBUFE UP GVOET BOE BTTJTU DMJFOUT JO FOTVSJOH FòFDUJWF DPNQMJBODF XJUI UIF JODSFBTJOHMZ WBSJFE BOE DPNQMFY SFRVJSFNFOUT K1.( QSPGFTTJPOBMT BMTP SFHVMBSMZ QBSUJDJQBUF JO discussions with the regulatory authorities to JNQSPWF UIF FOE QSPEVDU XIJDI $ZQSVT IBT UP PòFS *O BEEJUJPO B OVNCFS PG PVS UFBN members are BDUJWFMZ JOWPMWFE XJUI UIF $ZQSVT *OWFTUNFOU 'VOET "TTPDJBUJPO $*'" BOE BDUJWFMZ QBSUJDJQBUF PO related technical committees. OVS öSN JO $ZQSVT JT GVSUIFS TVQQPSUFE CZ UIF ,1.( JOUFSOBUJPOBM OFUXPSL PG TQFDJBMJTUT XIJDI TQSFBET BDSPTT DPVOUSJFT VTJOH B DPOTJTUFOUMZ IJHI RVBMJUZ NFUIPEPMPHZ GPS UIFJS XPSL "U ,1.( XF DBO HVJEF PVS DMJFOUT UISPVHI UIF DIBMMFOHFT BOE PQQPSUVOJUJFT QPTFE CZ UIF FWPMWJOH SFHVMBUPSZ EFWFMPQNFOUT BOE BTTJTU JO JEFOUJGZJOH PQUJNBM BOE QSBHNBUJD TPMVUJPOT GPS UIF NVUVBM benefit of the fund manager and the investors.

‘One-stop’ service offering KPMG offers a wide range of services with UIF BJN UP QSPWJEF PVS DMJFOUT XJUI B APOF TUPQ TFSWJDF JO PSEFS UP GBDJMJUBUF BOE TJNQMJGZ UIF QSPDFTT PG TFUUJOH VQ BOE managing fund vehicles. Our services include: Regulatory Services: t "TTJTUBODF JO TFU VQ BOE TUSVDUVSJOH t "DUJOH BT QSPNPUFS PG UIF DMJFOU T FOUJSF BQQMJDBUJPO BOE MJBJTJOH XJUI UIF SFHVMBUPSZ BVUIPSJUJFT BT OFDFTTBSZ t "TTJTUBODF XJUI ESBGUJOH PG DPOTUJUVUJPOBM EPDVNFOUT BOE QSJWBUF PòFSJOH NFNPSBOEVN QSPTQFDUVT t %FTJHO PG DPSQPSBUF HPWFSOBODF GSBNFXPSL BOE QSFQBSBUJPO PG JOUFSOBM PQFSBUJPOT NBOVBM t "TTJTUBODF XJUI SF EPNJDJMJBUJPO PG GVOET "udit Services: t "VEJU PG UIF TUBUVUPSZ BOOVBM öOBODJBM statements based on IFRS; t $PNQMJBOU BOE SFHVMBUPSZ SFQPSUJOH GPS clients; t $POTVMUBUJPO PO BVEJU BOE BDDPVOUJOH matters;

TBY 4FSWJDFT t 'VOE TUSVDUVSJOH BOE USBOTBDUJPO BOBMZTJT t *OUFSOBUJPOBM UBY QMBOOJOH BOE JNQMFNFOUBUJPO PG DSPTT CPSEFS investments and transactions; t 1SFQBSBUJPO BOE TVCNJTTJPO PG DPSQPSBUF UBY SFUVSOT t 7"5 TFSWJDFT JO SFMBUJPO UP GVOE QSPWJEFST BOE 7"5 DPNQMJBODF "dvisory Services: t *OUFSOBM BVEJU SJTL BOE DPNQMJBODF services; t 'JOBODJBM SJTL NBOBHFNFOU t 5SBOTBDUJPOT BOE SFTUSVDUVSJOH t *5 BEWJTPSZ t #VTJOFTT QFSGPSNBODF TFSWJDFT 14, Esperidon Street, 1087 Nicosia, P.O. Box: 21121, 1502 Nicosia T: +357 22 209 000 F: +357 22 678 200 E: nicosia@kpmg.com.cy W: www.kpmg.com.cy

KPMG provides comprehensive audit, risk advisory, tax and regulatory services to fund managers in setting up and operating through Cyprus. Our clients look to us for leadership and guidance in areas such as: fund set-up and structuring; regulatory interpretation and support; proactive tax advice; investment acquisitions and due diligence; fund liquidation, re-domiciliation and/ or restructuring. Our local practice is at the forefront of industry issues, working closely with the industry and its representatives and actively participating in the firm’s global product development programmes. The combination of a strong local practice, with significant professional and industry experience, along with the global reach of KPMG International fund services network places us in an optimal position to provide added value service to our clients as they address the industry challenges, and guide them in grasping opportunities. For more information please contact: Christos Vasiliou Board Member Primary Contact T: +357 22 209 113 E: cvasiliou@kpmg.com Marie-Helene Angelides Senior Associate Regulatory & Compliance T: + 357 22 209 227 E: mangelides@kpmg.com

kpmg.com.cy

©2014 KPMG Limited, a Cyprus limited liability company and member of the KPMG network of independent member firms affiliated with KPMG International Cooperative (”KPMG International”), a Swiss entity. All rights reserved.

Global experience, local approach in the Funds Industry

SPECIAL SUPPLEMENT

PwC Cyprus

Chris Odysseos, In charge of Investment Funds

C

yprus is becoming one of the fastest growing investment fund centres in Europe through the prompt response to regulatory developments HUK P[Z Z[YVUN ÄUHUJPHS ZLY]PJLZ sector. The recent changes in the European fund landscape are expected to raise investor JVUÄKLUJL PU [OL Q\YPZKPJ[PVU by creating a European “passWVY[¹ VM X\HSP[` HUK YLN\SH[VY` compliance. The country is ILULÄ[PUN MYVT [OL TVKLYUPaH[PVU VM P[Z YLN\SH[VY` MYHTL^VYR for investment funds, as well as from an increasing appetite of investors and fund service providers for EU-regulated jurisdictions. Cyprus offers IV[O ,< YLN\SH[LK <UKLY[HRings of Collective Investment in Transferable Securities (UCITS) and non UCITS funds. CurYLU[S` [OL SLNPZSH[P]L MYHTL^VYR for investment through nonUCITS funds in Cyprus is the Law of International Collective Investment Schemes of 1999 (ICIS Law). This will soon be replaced by the Alternative Investment Funds Law (AIF).

The new AIF Law is expected to be enacted towards the end of 2014. It will introduce a number of options, such as retail funds which can further be listed and traded on a recognized Z[VJR L_JOHUNL ZLNYLNH[PVU of assets and liabilities within the same AIF with the establishment of different investment compartments (umbrella funds), etc. Cyprus has also transformed the European Directive that regulates Alternative Investment Fund Managers into national law (Law 56 (I)/2013). The Law regulates the setting up and operation of Alternative Investments Fund Managers (AIFM) who manage all types of investment funds which are not UCITS (i.e. AIFs). One of the cornerstones of the Law is the PU[YVK\J[PVU VM H ºZPUNSL THYRL[ MYHTL^VYR» [V YLN\SH[L [OL VMMLY or placing of shares or units in an AIF. It introduces a European ‘passport’ under which H\[OVYPaLK (0-4Z JHU THYRL[ AIFs to professional investors throughout the EU, subject to a UV[PÄJH[PVU WYVJLK\YL PwC has a multi-disciplinary team of specialists who can assist you with all aspects of setting up a Fund or Fund Manager, the authorization process and the ongoing requirements. A funds dedicated team is commissioned to deal with the whole spectrum of fundsrelated matters, thus providing solutions and responses leveraging on our expertise. In particular, our team can assist you with:

40 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

3PJLUZPUN HWWSPJH[PVU [V [OL 9LN\SH[VY We examine the alternative MVYTZ [OH[ [OL M\UK JHU [HRL ZV that it meets your requirements. We can prepare the full appliJH[PVU WHJRHNL [OH[ ULLKZ [V be submitted to the Regulator. During this process, our experienced team will advise you on how better to structure your operations and will assist with the preparation of all the necessary documents to be included in the HWWSPJH[PVU WHJRHNL

+PYLJ[ HUK 0UKPYLJ[ ;H_ ZLY]PJLZ We provide a comprehensive set of Direct and Indirect Tax compliance and advisory services. This ensures that the fund is set up PU H [H_ LMÄJPLU[ THUULY HUK PZ compliant with all tax requirements in Cyprus and abroad throughout its extensive net^VYR 6\Y ZLY]PJLZ JV]LY IV[O corporate and individual taxes.

3LNHS Z\WWVY[ We provide assistance and support with the incorporation of the entity to be licensed as a Fund, including the drafting of the constitutional documents. We provide legal support both during the fund’s application process and operation (e.g. preparation of agreements).

(KTPUPZ[YH[PVU ZLY]PJLZ We have developed systems and procedures to ensure that our fund administration is exLJ\[LK PU HU LMÄJPLU[ HUK JVZ[ effective manner. Our services

include fund accounting, management reporting and Net Asset valuations, subscriptions and redemptions, compliance and regulatory reporting, statutory and secretarial Services, etc.

(ZZ\YHUJL ZLY]PJLZ We provide on-going services with respect to annual statutory H\KP[ VM [OL 0-9: ÄUHUJPHS Z[H[Lments as well as interim review, should you wish to prepare PU[LYPT ÄUHUJPHS Z[H[LTLU[Z VU H quarterly and half yearly basis. Our multidisciplinary team is available to assist you. You may contact: CHRIS ODYSSEOS In charge of Investment Funds GEORGE LAMBROU 7HY[ULY 9PZR (ZZ\YHUJL Consulting PANICOS KAOURIS Partner, Direct Tax Services SPYROS EVANGELOU Partner, In charge of Legal Practice : ( ,]HUNLSV\ *V 33* ANNA LOIZOU Partner, Assurance Services MARIA ATHIENITOU :LUPVY 4HUHNLY 9PZR (ZZ\YHUJL Consulting

CONTACT INFORMATION

PwC Cyprus Julia House, 3 Themistocles Dervis Street, CY-1066 Nicosia P O Box 21612, CY-1591 Nicosia Tel: (+357) 22555000 Fax: (+357) 22555001 Website: www.pwc.com.cy

www.pwc.com.cy

Preparing the next generation of funds for growth

Our multi – disciplinary teams drawing from our more than 900 local professionals with an ability to reach 184.000 professionals in 157 countries, can bring to you the expertise of our global industry dedicated specialists serving 84 of the top 100 investment management firms worldwide. We understand the challenges involved in setting up a new fund in a new jurisdiction and we offer a one stop shop for you and your fund on professional services covering: x x x x x

Licensing services Direct and Indirect Tax services Legal support Administration services Assurance services

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44 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

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CONTACT INFORMATION

SMC Med Trustees (CY) Ltd 12-14 Kennedy Avenue, 6MÄJL 5PJVZPH Cyprus Tel: (+357) 22272700 Fax: (+357) 22270203 e-mail: scharalambous@smctrust.ch Website: http://www.smctrust.ch

OPINION

Double Standards The Law regulating the Administrative Services Sector is far from satisfactory.

T

he Cyprus Fiduciary Association believes that the current supervisory framework for the regulation of the administrative services sector is unable to ensure the stated objectives of the Cyprus government regarding (a) the country’s full compliance with international standards on money laundering and terrorist financing after the negative rating of Cyprus by the Organisation for Economic Cooperation and Development (OECD) on transparency and exchange of information, and (b) the upgrading of the quality of services to enhance the competitiveness of Cyprus as a financial centre. There is no need to restate the importance of the administrative services sector to the Cyprus economy; the representatives of the Troika have expressed the position that the international business sector is one of the key pillars that will support the recovery of the economy. The Law introduced in December 2012, (Law196(I)/2012) regulating the provision of administrative services, ended up exempting all but a small proportion of the overall sector (about 80% is exempted). Based on their ownership structure and not the type of services they provide, all Administrative Services Providers (ASPs) which are eligible for membership of the Institute of Certified Public Accountants of Cyprus (ICPAC) and the Cyprus Bar Association (CBA), are exempted from the Law. It should to be stressed that exempted persons are not bound by the provisions of any legislation for the provision of administrative services but merely by the Directives and Codes of Conduct issued by the two bodies. Unfortunately, there are striking differences among the three regulatory frameworks, which our Association has noted and reported to the Ministry of Finance. In summary, there are differences in the minimum number of persons managing the ASP, the requirement for internal audit function, the capacity to outsource to persons outside the Republic, the maximum levels of penalties, the extent and frequency of reporting, the requirement for prior approval of changes to the ASP, etc. The discrepancies are so significant that many ASPs have changed their ownership structures and withdrawn their application to the Cyprus Securities & Exchange Commission (CySEC) in order to escape the provisions of the Law. The fact that we do not have a common regulatory

Dissimilar requirements create give a competitive advantage to those exempted from the Law

info: George Ioulianos is General Manager of the Cyprus Fiduciary Association. 46 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

By George Ioulianos

framework for all ASPs operating in Cyprus raises the following issues: 1. Weakness as a country to impose a strong regulatory framework and to comply with all international standards for preventing money laundering and terrorist financing, more because of the ineffective implementation of the requirements, due to many different reasons. 2. Weakness in applying effective monitoring of the compliance of ASPs with their obligations under the relevant laws and regulations, e.g. AML & KYC procedures, exchange of information, submission of annual reports and tax returns, etc., thereby increasing the risk of another poor evaluation by the OECD and other international organisations (e.g. the World Bank), as well as the country’s inclusion on blacklists and the lifting of Double Tax Treaties with other countries (e.g. India, Russia). Any adverse developments will negatively affect both the government itself (loss of income tax, VAT, annual levy, submission of annual report fee, etc.) and other sectors of the economy such as the services sector (auditors, lawyers, consultants, etc.), banking, land development, hotels, restaurants, transportation and more. 3. Discrimination and unfair competition among firms providing the same exact services (ASPs under CySEC are currently experiencing a loss of business as their clients or potential clients are promised “an easier way of life” elsewhere) while dissimilar requirements create different financial burdens on the operation and provision of fiduciary services, giving a competitive advantage to those exempted from the Law. The Cyprus Fiduciary Association is not in favour of relaxing any measures or requirements. On the contrary, we support the enhancement of regulation with provisions that will raise the standards of our sector and services. We strongly believe that the starting point for achieving the aforementioned objectives is the introduction of a rigid and comprehensive regulatory framework, which will apply to all ASPs in the sector, will be applied by a single supervisory authority, and will cover both AML and operational aspects. We genuinely care about the proper and effective supervision of the sector, which will enhance the image and credibility of our country as an international business centre. To this end, we believe that constructive cooperation and consultation among all interested parties will be able to overcome any difficulties for the achievement of our common goals.

Global investment prospects are positive though things will be slower than expected – but not in Cyprus, says Simon Fasdal.

48 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

INVESTMENT

As Head of the Fixed Income Trading desk at Saxo Bank, Simon Fasdal is familiar with L]LY` HZWLJ[ VM [OL ^VYSK»Z ÄUHUJPHS THYkets. Ahead of his presentation in Limassol last month on Opportunities in the midst of Turbulence, he gave an exclusive interview to Gold. By John Vickers

A

fter putting the finishing touches to his eagerly-awaited presentation, Simon Fasdal joins me in a quiet corner of Le Meridien’s reception area to talk about Cyprus and the global investment scene. I start by suggesting that the title of his talk (Opportunities in the midst of Turbulence) could have been tailor-made for Cyprus, where great efforts are being made to attract foreign investment after last year’s bailout. So is the old cliché about a crisis being an opportunity always correct? “It’s hard to say if it’s always correct,” he replies with a smile.”It’s evident that there are certain markets that have suffered a misprice after their crisis and Cyprus may be one of these. In Cyprus we witnessed a sharp drop in GDP and a close-to-panic situation after the bail-in last year and the bond market reacted very fiercely. But if we look at the country now, the bond market has returned to a more normal status and Cyprus’ risk premium has come down significantly so we can see that things are improving. Cyprus’ latest GDP figures still show negative growth but they are better than expected. There is a clear movement in the right direction and numbers such as economic sentiment indicators – not only for Cyprus but for the whole of southern Europe – are going up. So in these circumstances, an investor from abroad might indeed find that this is a time for opportunities.”

Fasdal believes that the Troika’s programme has worked in the countries that were hardest hit by the financial crisis and have been through what he calls “the most severe rebalancing”, i.e. Greece, Cyprus, Spain. He recognises that other factors have also played a part, “including the very positive capital flows back into the eurozone.” In a recent video presentation, Simon Fasdal talks about CoCo (Contingent Convertible) Bonds, saying that they are going to be extremely popular in 2014. I remind him of the fact that one of the big “scandals” of 2012 was the issuing of such bonds by Bank of Cyprus to apparently unsuspecting clients who subsequently lost their money on conversion. Just how risky are they? He replies without hesitation: “They are very risky for private investors who believe that that they are buying a normal bond product. I have written about these bonds and warned individual investors that they are about as far away from a normal bond structure as is possible. The problem is that when you need all the robust structures of a bond, they transform into a more equity-like product and that is not what you want. If the bank gets into some kind of difficulty – or if a country gets into difficulty – such bonds are the first in line in case of a banking crisis and investors need to know that.” Given the way the global markets react to news of all kinds, how difficult is it for someone like Simon Fasdal to be advising people what to do with their money?

AN INVESTOR

FROM ABROAD MIGHT INDEED FIND THAT THIS

IS A TIME FOR

OPPORTUNITIES Doesn’t he find himself changing his recommendations on an almost daily basis? He says that for the past 5 years, it has been a good investment strategy to look at “the epicentre of panic” which may be where the next wave of opportunity is about to appear. And he explains: “If we look at where the last panic was, it was in 2013 in the emerging markets where the risk premiums are very high. So from Brazilian and Russian bonds, for example, we can get many times the pickup we could get in the eurozone. So investors need to carefully watch the shifts in risk sentiment around the world. Those investors who went into Portuguese or Spanish bonds two years ago have made a fortune.” Although non-financial news can affect investment decisions, Fasdal suggests that private investors are sometimes wise to take the opposite course to professional and institutional investors. “As an investor you should have a lot of different inputs to your decisions,” he says. “If we look at the Russia-Ukraine crisis, for example, Russian bonds currently have a very high yield because there have been a lot of selloffs by professional investors and it is true that these tend to be dictated by management decisions based on news headlines. However, the private investor might want take a look at Russia where the risk right now is not economy-related.” With over 17 years of experience in the financial markets, Simon Fasdal has seen many changes, particularly in the way that the Internet has made the world smaller. When I ask him to identify the biggest

THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

Gold 49

INVESTMENT

single change that he has seen, he is immediately ready with an answer: “The biggest change is that private investors can now handle almost everything themselves. They can use a trading platform like ours, they can use the Internet to gather market information and so if they want to act like professionals, that is now possible for individual investors. This will continue and it is jeopardising many old, very big traditional banks which know that in the next 5 years they are going to have to change their business model. There is a ’danger’ for them that many investors might do better without them! This, I believe, is the major game-changer and so far we have only seen the tip of the iceberg.” Another major change is 24-hour online trading. Is it really such a good thing? Fasdal believes that it is: “The way the world works at the moment, with all markets reacting fast and efficiently, is a good one,” he says confidently. He explains that an integrated global market with different time zones is “quite an efficient way to absorb certain shocks”. That said, he admits that a lot of fast trading and perhaps too-fast decision making can cause panic patterns, leading the markets to react in an exaggerated way to what is going on. But in general, the fact that the market is now global is, he says, a positive development. “Today, investors can go global though many of them still don’t. If you only buy equities, stocks and bonds in your own country, you might end up with a lower performance than you could have had if you had taken a view of other countries and regions. In northern Europe, for example, we are seeing more and more traditional private bank clients looking at southern Europe and the emerging markets. They are becoming more familiar with what is happening outside their own country, taking decisions abroad and understanding that this is a good way of diversifying their investment portfolio.” Despite the ease with which investors can now trade on a global scale, is it true that, following the global financial crisis, many have been happy to simply maintain their capital? Indeed it is, says Fasdal, especially in the case of professionals. “There has been a lot of ‘money parking’ over the last 5-6 years,” he notes. “In the post-Lehman phase, a lot of banks and pension funds have shown a great preference for a safer style of investment, partly

INVESTORS WHO WENT INTO PORTUGUESE OR SPANISH BONDS TWO YEARS AGO HAVE MADE A

FORTUNE

due to regulatory changes. This is why we initially saw very low yields in northern Europe and especially in Germany where there were even negative yields before the ECB took its present course. So-called ‘money parking’ means protecting your base investment but this is mostly on the professional side. And when professional investors flee for certain reasons, it may be a good time for private investors to go in!” If there is one area of investment in which Simon Fasdal is acknowledged around the world for his expertise, it is the bond market where, in Europe especially, there has been a huge rally in government and corporate bonds. “For the private investor, northern European bonds have totally lost their attractiveness – we’re talking about 10-year German yields closing in at 1.30 – so they have to look elsewhere. As I said earlier, if they had bought southern European bonds in 2012-13, it would have been a very profitable investment. Now we have the choice between some high-yield high-risk bonds from corporates with a very low rating, maybe 4-5% at the moment. In southern Europe there are still bonds worth going after, both corporate and government, and compared with German yields, they are still high. As I have already noted, the clever thing is to be a bit more global: look at the countries that suffered most last year in the emerging markets and see the bond yields there. I think we are going to see improvements this year so it’s probably a good idea to get in there before everyone else.” Cyprus recently issued a 6-year bond at 6.5% interest, described by the Finance Minister as a first step towards an eventual return to the financial markets. Does that sound like a positive step to Saxo Bank’s Head of fixed income trading? “Yes, it does. I believe he’s right. What

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happened in Cyprus was a very deep crisis on the back of the bail-in and the aftermath of the entire European debt crisis. Cyprus was the last country to be hit but there has been a very fast rebalancing which could only occur in a very small, flexible economy. We can see that confidence in the economy is returning and the economic indicators are certainly pointing in the right direction – from a very low level they have actually rocketed –and bond yields are coming down fast so risk premiums are disappearing, which is another good sign. Before the debt crisis and the bail-in, Cyprus was attracting investment from many places around the world; after a fierce series of downgrades, they have begun going up again. And I would say that if Cyprus has 0.5% positive growth next year, the shift from -4% to +0.5% will feel extremely positive.” As Simon Fasdal prepares to meet his audience, I ask him for a broad prediction for investment in 2014. “At the beginning of the year it was my belief that we would be seeing very low yields for a long time, especially in the eurozone, and at some time a return to the emerging markets,” he says. “On the first point, they’re still going down and so this will make some countries of the emerging markets appear even more attractive in their potential returns and investors will start coming in. I would say that we are on a positive track all over the world but it’s going to be slower than expected. In 2011-12 things were quite bad for investors who, in some ways, are still struggling. There is still a danger that if everyone does the same thing at the same time we could stay in a state of flux for years. And some countries still need a lot of reforms – France is one of them – so there’s a mixed picture for the eurozone but the small arrow is going up.”

BRANDING

Brand New 52 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

JONATHAN GABAY IS A HIGHLY RESPECTED CREATIVE BRANDING, PR AND REPUTATIONAL MANAGEMENT AUTHORITY. ONE OF EUROPE’S LEADING INDEPENDENT BRAND ADVISORS AND THE AUTHOR OF 14 BESTSELLING TITLES, HE TAKES A PSYCHO-SOCIOLOGICAL APPROACH TOWARDS BRAND AUTHENTICITY. ON SEPTEMBER 26, HE WILL LEAD THE BRAND CONGRESS IN NICOSIA AT THE HILTON PARK HOTEL, WITH A TALK ENTITLED “FROM THE ASHES OF RECESSION TO THE BRAND OF SUCCESS”. AHEAD OF HIS KEENLY-AWAITED APPEARANCE, ANCE, HE GAVE AN EXCLUSIVE INTERVIEW TO GOLD. By John Vickers

Gold: When did you first become aware of the power of a good brand? Jonathan Gabay: Probably at two years old. At that age, infants begin not simply to recognise brands (which amazingly enough starts even earlier!) but they start pestering their parents to buy the brands as seen on TV, heard on the radio, recognized on the shelves and tapped on iPads. This is an alternative reason why those years are called ‘the terrible twos’! Gold: What has it taken you personally to become recognized as a brand expert? J.G.: Whilst I have written scores of books on the subject and worked with some of the biggest corporations and agencies in the world – I think that in terms of brands, most people are ‘experts’ – I am really nothing special. A baby born today is introduced to a world of brands. The older they grow, the more instinctively accomplished they get at recognizing what is an authentic brand and what isn’t. They eventually become informed by everything from news about corporate scandals to the talk around the office water cooler about the latest must have gadget. Being so informed, today’s generation and tomorrow’s consumers – including business-to-business consumers – are particularly challenging for intelligent brands with reputations to keep, markets to nurture and profits to maintain.

Gold: Presumably, the quality of the product comes first? Can a good brand save a bad product? J.G.: Yes. No. Precisely! By which I mean: Yes – the product or service must be great. No, branding – in terms of logos and promotions alone – is not sufficient to turn a venture into an enduring success. The brand is something that is lived through ‘doing’, thus helping people ‘become’. Precisely! A product or service is the brand. Intrinsically, there is no separation. Gold: Given the global market and the huge advertising budgets allocated to keep major brands in the public eye, how difficult is it to establish new ones? J.G.: Now is a great time for emerging brands. Whilst people cherish long- established and so trusted names, increasingly we live in a world where people are looking for alternatives to the establishment. Often the nimble can react more quickly and, in many cases, serve better. Gold: What does it take to encourage people to try something new? J.G.: That is a quite a complicated one to answer but, very broadly speaking, it’s all about either boredom with what they have; the incapacity to be satisfied with what they have (this is different from being bored with

World

Some consumers prefer products that are beyond the reach of the masses what they have); or the desire to have something which delivers faster, more cost-effectively, more strikingly and efficiently. Ultimately, when it comes to brands, the provider needs to demonstrate why something is desirable. Most of us have an idea of what we want. Sometimes we just need someone – or a brand – to help us focus our ambitions. At other times we don’t even know what we want until we are shown it. Henry Ford [founder of the Ford Motor Company] exemplified this when he said: “If I had asked people what they wanted, they would have said ‘faster horses’!” Gold: In Cyprus we can take the case of Lidl, whose products were almost all entirely unknown here when the chain opened. And yet, perhaps because of the price factor, people “took a chance” on unknown brands and, in many cases, have probably stayed with them. Is this a typical scenario? J.G.: Lidl’s brand is indicative of an era. The company has uncovered a very cost-savvy market that is prudent either through choice or circumstance. Lidl exploits this market whose concern with costs is sometimes burlier than any affinity towards a given traditional off-theshelf brand. However, Lidl’s approach is not an all-encompassing panacea for brands. Some

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BRANDING The Brand Congress takes place on 26 September 2014 at the Hilton Park Hotel, Nicosia. It is organised by IMH. Tel: 22505555 | e-mail: events@imhbusiness.com Website: www.imhbusiness.com

Ultimately, when it comes to brands, the provider needs to demonstrate why something is desirable consumers prefer products that are beyond the reach of the masses, rather as some tourists to Cyprus are happy to pay for a five-star hotel with a private beach rather than settle for a more popular choice. For them, cost is not the issue. In all cases, today’s brands have to operate in a world where consumer expectations are high. That means taking into account broader issues including: customer service, technology, the in-store experience, distribution, pricing, availability…Even a brand’s management investments.

more resounding than any internationally familiar logo alone. In my next book, Brand Psychology, I explain the importance of how to intelligently remind people of a brand’s values – without overwhelming consumers with hype. In today’s globally cynical world, such a tactic alienates people.

Gold: So well-known brands cannot afford to rest on their laurels, particularly if there is lots of competition? J.G.: Absolutely not. But don’t kid yourself on this one. They never could. To stay in business you have to seriously deliver on a promise, rather than casually promise to deliver. Equally, you have to understand that a geographical share of market is not the same as a share of minds. In a world that is striving to find – or, if you like, to re-establish a sense of brand identify – local hearts can persuade global minds.

Gold: Apart from areas where technology has outpaced certain companies (Kodak, Nokia, etc.), are there clear reasons why, once a brand is established, it may not survive? J.G.: Every brand has a belief. Faith in that belief is manifested through the brand’s actions and communications – online, offline, in the media, at premises, by taking responsible decisions on behalf of stakeholders, ensuring that employees are engaged, suppliers fairly treated, factories run safely, products built for purpose, services delivered and so on. Through practicing such faith, a brand realises its mission. The brand’s belief becomes empowered to give hope (a brand’s vision) to everyone connected with it, including, consumers, followers, supporters, shareholders and so on. However, should the meaning, practice and integrity of that faith be compromised or worse (lost), any purported authentic belief becomes revealed as being little more than transparent deceit.

Gold: Let’s take another globally popular example. What would happen to sales of Coca-Cola if the company decided not to advertise for, say, a whole year? J.G.: You might think I am going a little off track here but to answer your question, let’s explore two completely different kinds of ‘global brands’: the Roman Empire and Byzantium (both one-time rulers of Cyprus). Each believed that their ‘brand’ was eternal and insuperable. Yet even their magnificent legacies eventually turned to stone. A brand, whether political, social or commercial, can never become so arrogant that it rests on its laurels. By continuously being relevant and having a finger on the pulse of people’s genuine concerns, it retains its position as a leader. The principles of such a brand are far

Gold: Is there a single thing that you can describe as the key to a successful brand? J.G.: Authenticity – both in deed and conviction.

Gold: How important is it to be seen to be improving (“new formula!” etc.) while sticking to the established model that attracted customers in the first place? J.G.: The familiar reassures some people while others are itching for change. Through shrewdly nominated brand lines and extensions, brands can cater for all tastes. How-

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ever, if a brand is stretched too far – like a rubber band – it snaps. Gold: How have advertising channels, by which we gain our information and perceptions of brands, changed over the years? Do you foresee traditional advertising (press, TV, billboards) platforms being totally replaced by online and social media in the future? J.G.: From the Guttenberg Press to Google algorithms, message platforms have always been constantly changing. Core messages remain constant such as informed perceptions about ourselves and how brands help realise those human needs, fears and aspirations. All of these sensibilities are communicated by brands on pages, websites, posters, TV ads, point of sale, Apps … all designed to deliver answers that support enduring dreams, hopes and practical wants. Gold: Is there a standard life expectancy for a good brand? In 20 years’ time, for example, will the top 10 brands in the world be the same as today? J.G.: I used to work at a global advertising agency which would accept nothing less than being the ‘biggest’ and the ‘best’. However, in being first, as well as conducting standard best practices, you are continually on the defensive. Coming second sometimes has its merits. (Avis cars used to have a slogan that read: “We are not first – you are”). The guy in front isn’t just spotting hazards ahead, but helping you decide whether or not to stay on the same road as he is on. Just as your eyes are on that guy in front, so consumers have their eyes on you. They are checking to see whether branded corporations, organisations, products, services, parties, institutions – even the clergy – should remain on their most admired list this time next year.

Getting

PROFESSIONAL SERVICES

Better ASPIRING TO ELEVATE ITS STATUS UPON THE INTERNATIONAL STAGE OF BUSINESS, CYPRUS NEEDS TO TAKE A CAREFUL LOOK AT ITS PRACTICES TO ENSURE THE ERADICATION OF ALL BLEMISHES – WHETHER NONCOMPLIANCE OR OUTOF-DATE LEGISLATION – WHICH MAY SPOIL THE ISLAND’S IMAGE ABROAD. THEO C. PARPERIS, PARTNER & HEAD OF GLOBAL COMPLIANCE SERVICES, PWC, TOOK TIME OUT FROM HIS BUSY SCHEDULE TO EXPLAIN TO GOLD JUST HOW CYPRUS CAN AMELIORATE ITS PRACTICES, STRENGTHEN ITS MODEL, AND PREPARE – ONCE AND FOR ALL – FOR ITS LONG-OVERDUE CLOSE-UP. By Chloe Panayides, Photograph by Jo Michaelides

Gold: The OECD has named Cyprus as being ‘non-compliant’. What does this mean and what are the repercussions of being non-compliant? Theo C. Parperis: It means that Cyprus has a low percentage of compliance by corporate entities towards the authorities such as the Inland Revenue Department and the Registrar of Companies. At present, we have more than 200,000 companies registered but less than half are compliant, which is unacceptable by OECD standards.

Gold: What key corrective measures must Cyprus implement prior to the next OECD review? T.P.: For a start, all companies that have been dormant or non-compliant for years should simply be removed from the Registry of Companies. In other jurisdictions, if you are not compliant for some time, the company is – apart from receiving penalties – struck off or suspended from the Registry. By removing these companies from the Registry, the population is reduced and hence the percentage of compliance improves. More importantly, the Inland Revenue Department and the Registrar of Companies must push all companies for full compliance through warning letters, penalties, etc. Over the last 2-3 months, there has been a strong push by the authorities, which has resulted in increased compliance. This effort must continue until Cyprus achieves fully acceptable compliance levels in accordance with OECD standards. Gold: In your view, where does responsibility lie for Cyprus ensuring that, from here on, it adheres to compliance policies and regulations? T.P.: Both the authorities and professionals

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need to become more demanding towards compliance requirements, if we are going to obtain and maintain a better assessment by the OECD. Following the latest OECD report and the risk of Cyprus being blacklisted in case we did not improve, the Government and the relevant authorities responded swiftly with a detailed action plan and its implementation is being closely monitored. As a result, we expect that the next OECD review will acknowledge the improvement made on issues of compliance and exchange of information. Also, the professionals – such as lawyers, accountants, and fiduciary service providers – as well as the relevant professional bodies have realised the importance of assisting the authorities in this effort. Gold: How far do you feel that Cyprus is lacking a culture of management and, thus, performance? T.P.: Our culture, in terms of law enforcement and adherence to procedures and statutory obligations, certainly needs to change. We should keep the good aspects of our culture – our friendly approach, our eagerness to assist, our prompt service and our hospitality – but there should be zero tolerance towards noncompliance of our duties towards the authorities. A high- performing culture is based not only on the provision of high-quality services but also on the firm application of procedures, processes and adherence to legal obligations. Gold: How can Cyprus simply and swiftly enrich its product? T.P.: The international business environment is changing at a very fast pace. The G20 countries have taken a stricter stance towards international business centres

With the right vision, Cyprus has all the ingredients to become the Singapore of Europe

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PROFESSIONAL SERVICES

such as Cyprus and Luxembourg, and tax havens such as the British Virgin Islands and Mauritius. There is also a business shift towards the East and the BRIC countries. Furthermore, there is a growing number of High Net Worth Individuals (HNWIs) who have special interests and needs as regards the management and administration of their wealth. Cyprus must therefore develop new products to cater for these business trends and needs. Gold: Can you give some practical examples of this? T.P.: The following actions would enrich our product range and raise our image as a leading international business centre: • New Double Tax Treaties with African counties given that the BRIC countries invest heavily in Africa. We are close to Africa and, hence, an obvious choice to act as a business investment hub into Africa. • Special legislation to cater for the needs of Family Offices in order to attract them to Cyprus for setting up their office base with obvious benefits for the whole economy. Family Offices are special offices, which employ various professionals, such as financial persons and administrators, in order to take care of, manage and protect the private investments and assets of High Net Worth Individuals. This would help fight unemployment. • Updated legislation for Funds, the enactment of pending laws pertaining to issues such as leasing, cross-border mergers with non-EU countries, cell companies, and more. • And, finally, we need new legislation that can bring more business to Cyprus, such as special

where the government and the private sector work hand in hand in developing their products and promoting the country as a successful international business centre. They continuously study international trends and they find solutions to cater for them, for example, by amending their legislation, introducing new products, etc. Luxembourg was one of the first countries to introduce special legislation governing the operation and administration of Family Offices, which attracted a good number of them. Family Offices are a growing business in Europe and Luxembourg acted fast. Having read their legislation on Family Offices, I can say with confidence that there is nothing that Cyprus cannot provide by making minor changes to its own existing legislation. Hence, all that is required is goodwill, focus, and the right cooperation between the Government and the private sector. Gold: Cyprus has fared well so far as regards attracting foreign investors. How can we now evolve to encourage even greater investment? T.P.: We have indeed reacted well since the March 2013 events. We have succeeded in keeping most international clients in Cyprus, which proves that our overall package is resilient and has some definite competitive advantages. We have a business-friendly tax and legal system, high quality professional services at reasonable prices compared to other EU centres and we offer client-focused service. However, we have still some way to go before we can become a destination of choice for corporations and HNWIs to make large investments and

There should be zero tolerance towards non-compliance of our duties towards the authorities incentives for attracting (a) HNWIs to become residents of Cyprus and who will pay taxes and spend money locally (b) international corporations to set up their Head Offices in Cyprus and (c) a top international bank with full operations, including provision of international custody services. Gold: Are there any international models you can cite as having taken profitable steps that Cyprus could emulate? T.P.: A good example could be Luxembourg

set up their operations on the island. We need to make some changes to our tax legislation in order to tax HNWIs on a remittance basis, i.e. on the revenues that they generate or bring to Cyprus rather than on their worldwide income, as for example they do in the UK through the non-domiciled residence concept. Because of the so-called ‘non-doms’ legislation, London has attracted HNWIs from all over the world, with huge benefits for the local economy. At the same time, we need to update our legislation to cover new products while upgrading our tour-

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ism and leisure packages. We also need to have more high-end entertainment products. There is golf but we need to develop marinas, theme parks, casinos, etc, which should blend nicely with our traditional food and culture and which is what wealthy international visitors, whether tourists or business persons, like to see in Cyprus. Finally, we have to address the bureaucracy issue. With the right vision, Cyprus has all the ingredients to become the Singapore of Europe given our location, highly educated personnel, food, good weather and traditional local hospitality. Gold: What should be Cyprus’ overall goal in the short to medium term in order to facilitate future, sustainable development? T.P.: Cyprus is destined to continue its focus on services. On one hand, we have the traditional service sector of tourism, which is very important for the economy and, on the other hand, the professional services sector (i.e. everything related to how successful Cyprus can be as an international business centre). Both have a multiplier effect for other sectors of the economy and they complement each other. The international business sector still provides the best prospect for the young generation of university graduates. Gold: What role will PwC be playing in aiding the fulfilment of these goals? T.P.: PwC aims at continuing to be at the forefront of the efforts to assist the Government and the relevant authorities in improving the image of Cyprus as an international business centre and, by extension, the country’s economy. A year ago, we commissioned a dedicated study of the contribution of the professional services sector to the Cyprus economy, which included recommendations for improvement. With the help of our PwC international network, we have made specific suggestions to the Government for legislative and tax changes, which will help Cyprus to attract more international business. Over the last year, we have had dedicated teams assisting – pro-bono – many Government authorities such as the Ministry of Finance, the Inland Revenue Department and the Registrar of Companies in order to help Cyprus remain a competitive and successful international business centre. At PwC, we are committed to continuing to invest in improving the image of Cyprus through better compliance and improved products. We all need to do our best in order to ensure that the island’s image improves through strict adherence to the law, the creation of new products and improvements to our business conduct and etiquette. If we do so, then I genuinely believe that future of Cyprus is bright.

OPINION

Economic Matchmaking

Mutual harmony is the key to successful markets and sectors.

T

here are few tasks more mundane than pairing washed socks, particularly if one is the boring type who insists they match. This said, there are those who consider mismatched socks a fashion statement. What is my point? If I were to think of one quality that captures in a nutshell what distinguishes economies, what springs to mind immediately is that they do not simply have to balance demand and supply using price but match them suitably. The reality is that there is nothing mundane about the matching essential for an economy to function well. Matching is needed in labour markets and property markets. There is also a need to match savings with lending, and to match near-term inconvenience from construction with the greater convenience its creations offer in the long term. Indeed, it only takes one mismatch for others to follow. And what, in essence, all key economic indicators – the rate of inflation, interest rates, unemployment, etc. – measure is success in matching. As well as matching its aspirations with its willingness to invest in classroom education, an economy has to match the proportion of its young adults who receive vocational training with the number of apprentices demanded by its industrial, construction and agricultural sectors. An economy not only needs to match skills with vacancies but to match suitably skilled job seekers with properties within commuting distance from appropriate openings. And if it fails to make this “accommodation”, it will create unemployment rigidities and entrench regional divides. Furthermore, a nation has to match the demands for immediate satisfaction made by one generation with the price paid by the generations to follow: the cost in accumulated debt and the cost to the environment. There is also the requirement to pair the reward from taking risks with the responsibility if the “gamble” fails; moral hazard is the inevitable outcome if these are not matched or, put differently, if interests are not aligned. More broadly there is a socio-economic need to match personal freedoms with collective responsibility.

What, in essence, all key economic indicators measure is success in matching

info: Dr. Savvas Savouri is a Partner and Chief Economist of Toscafund. 59 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

By Savvas Savouri

Consider an economy which is not building homes to match the growth in its household numbers. In this case, the only thing building will be house price inflation. There is, of course, the reverse: over-building inevitably leads to busts, as, indeed, anything taken to excess will. Moreover, for an economy to grow healthily, it has to match its desire to protect its natural surroundings with the realisation that concessions have to be made in improving its built environment. For were an economy not to tunnel, excavate or extract, it would not match its ambitions with the delivery of the improvements to its real estate and transport infrastructures essential to achieving them. Similarly, an economy must not mismatch its long-term funding needs with short-term capital, or with capital sourced in a foreign currency (as distinct from foreign capital). If it does, trouble will never be far away and shocks will sweep into its property and labour markets. What the UK experienced in 2008 was the consequence of just such a mismatch. I would argue that Britain’s economy has made considerable strides in its ability to match, much improved from its woeful performance in the 1980’s as witnessed by the speed it has emerged from the travails of 2008 – its recovery in GDP and reduction in unemployment are testament to this. Underlying a great deal of the UK’s much improved matching ability are its transformed supply-sides. True, things still need improving. After all, Britain became a victim of an inexcusable capital market mismatch in the years running up to 2008. This said, one hopes that the lessons from that experience have been seared in the minds of those now empowered with macroprudential regulation. On a final point: Britons have to match their ambitions to grow economically with an acceptance that immigration is not a hindrance but a help. From my perspective, I see all Britain’s matches being made with time. It’s simply a dating game.

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PROFILE

CSC Christodoulou Ltd, a dynamic, Limassol-based accounting, auditing, tax & business advisory ÄYT PZ JLSLIYH[PUN P[Z 10th anniversary. Gold ZWVRL [V [OL ÄYT»Z founder and Managing Director, Christos S. Christodoulou about P[Z ÄYZ[ Z\JJLZZM\S KLJade and how he sees the next one for Cyprus and the professional services sector. By John Vickers, Photo by Jo Michaelides.

, PAST PRESENT & FUTURE

Gold: What made you choose to enter the accounting profession? Christos S. Christodoulou: The idea actually came from my father during my high school studies back in the ‘80s. Although he was a carpenter by trade, with no knowledge in the field, he felt that the accounting profession would suit me and he correctly foresaw that it would flourish. So he encouraged me to start private accounting lessons even before opting for the subject in high school, and that was enough to trigger my instinct. Having become a professional accountant, I have to credit him for his “third eye”. Thank you Socrates! Gold: Was it always your ambition to establish your own firm? C.S.C.: My only ambition was – and still is – to create. Either as a member of a firm or as an individual, my ambition is to deliver perfection. I only opted to establish my own firm because I felt that I was previously limited in how I could deliver my vision. Even now, after ten successful years with my own firm, I would not hesitate to say yes to new challenges, in any form, provided that the new team would have the same vision and goals and that something even greater would be created. Gold: Given the relatively large number of accountancy firms in Cyprus, how difficult was it to find a way of standing out from the competition? C.S.C.: Clients need the “whole package” of personal attention, a hands-on approach, quality, competitive fees, knowledge and experience, and delivery. Once you deliver this particular package, you gain the attention of your client and from then on, your reputation spreads from mouth to mouth. What we point out is that we will not just produce financial statements but will go beyond that and, within the scope of our expertise and engagement procedures, we will provide guidance and solutions for the businesses with whom we engage. Our emphasis is on being proactive rather than reactive. This is why we say that at CSC Christodoulou, we provide more than numbers. Gold: What is your particular area of expertise? C.S.C.: I would say that our greatest experience and knowledge are of the Real Estate, Construction, Tourism & Leisure, Shipping & Aviation and Commercial sectors. We

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PROFILE

have spent thousands of hours on research (technical and business) into these industries and have analyzed many aspects including complicated tax implications and solutions. In terms of services, we have formed a very successful team dealing with the proper structuring of such groups and activities and, further to that, with establishing best accounting and tax practices for each group in each field. By being a part of various committees and forums on the development of such issues, we have been able to contribute towards resolving many obstacles to the proper development of these industries.

THE ACCOUNTING PROFESSION PROVIDES CONTINUOUS AND VALUABLE SUPPORT TO THE ECONOMY Gold: The firm has had an impressive track record of professional awards and honours since its first year of operation. What has been the key to this success? C.S.C.: When I started the firm in 2004, I set two goals: to reach perfection in everything we do and to be professional in all our dealings. We never thought or even knew about any awards that might come our way. Those that we have received certify our firm’s culture and the way we do business with our clients. Being professional is a state of mind, not a game of impressions. Once you behave like that, success will surely reach you, either by way of an award or some other kind of recognition or appreciation. Our greatest recognition came from ACCA in 2005, when the firm was announced as the first firm outside the UK and Ireland to which a Quality Checked Award was granted. It was an honour for Cyprus, for the profession and, of course, for our firm. We have succeeded in maintaining our status until today, after a second Quality Checked Award from ACCA in 2013. To me, such awards prove our commitment to quality and professionalism, which is what our clients appreciate.

Gold: How much damage did the bailout do to Cyprus’ image as an investment destination and a regional professional services centre? C.S.C.: Without any doubt, there was an impact on the image of Cyprus as a Business Centre. However, both the Government and the private sector have undertaken a tremendous campaign to explain the decisive measures that the country is willing to take in order to sustain its role and services. It has shown that the “Cyprus Package” of high-level professional services, low tax rates and asset protection mechanisms, as well as the combination of living and working in Cyprus, is a unique value that cannot easily be given up. International clients are now fully aware of exactly what happened last year and, thankfully, they are still in favour of doing business in Cyprus. Gold: How good is the Accounting Profession in Cyprus? C.S.C.: Although we have heard a certain amount of criticism, I strongly believe that we have brilliant and ethically correct professionals in Cyprus. The accounting profession provides continuous and valuable support to the economy and accountants invest heavily in promoting Cyprus and its International Business sector, while offering their knowledge and expertise to the Government in an effort to improve those areas that need it. Gold: Apart from Professional Services, which sectors do you expect to flourish in the next 10 years? C.S.C.: I personally believe that Tourism & Leisure will be the Number One area. Cyprus is moving forward in this and there is still great potential in the tourism industry, especially with the new multimillion projects that are planned, such as casinos, marinas, new resorts, etc. God has blessed us with this location and we should make the most of it in all areas of activity. In addition to tourism, we have the new Energy sector and I foresee a boom in auxiliary services to the drilling companies, specialized ship services, ground services, port services, office space, manpower and more. Having big international companies working in or through Cyprus will definitely lead to a great need for such services. Furthermore, offshore shipping-related services for the Middle East can also become a major area of expansion for Cyprus, bearing in mind the amount of drilling and related work that will take place in the region. Shipping and Aviation will remain directly linked to a solution of the Cyprus problem. Once the Turkish embargo is lifted, both sectors will grow further.

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Gold: Whatever Cyprus does, it is not immune to global and regional events. What threats are of concern to you? C.S.C.: There are some critical foreign factors that could influence the country. The ongoing Middle East crisis (Syria, Egypt, Lebanon), Russian de-offshorisation, the Russia-Ukraine crisis and the subsequent sanctions, as well as the stability of the euro are all things that could affect us. Personally, I believe that if we play our cards right, we might even end up with benefits, meaning that our new role in the region will provide a unique opportunity to turn these threats into opportunities. Cyprus has a role to play in most of the above issues and I think the time has come to intervene in a constructive way and strengthen our position in the region and in the International Business arena. Gold: How would you sum up your firm’s first 10 years? C.S.C.: I am very proud and, at the same time, completely satisfied with the growth of our firm and the awards and honours received during these ten years. We have proven who we are and what we can deliver. Year by year, the firm has expanded, gaining prestigious clients and professional staff, and establishing a solid presence in the market. Major groups of companies have placed their confidence in our firm and brilliant professionals have joined our team. Gold: And what are your ambitions for the next 10? C.S.C.: 2014 is the beginning of a new business plan for our firm. Firstly, we wish to show our appreciation to our clientele and we have planned several events to this end during the year. Businesswise, we shall focus on expanding our expert tax and assurance services in specific sectors and groups for large local and international clients. This will involve our expansion both in Cyprus and abroad. And of course we shall continue to offer our support to the Government and to the economy through our constructive presence in various committees, forums and conferences. 2013 was a tough year for everybody but we have worked hard in order to overcome its negative effects. I believe that, having managed to grow under such circumstances, great opportunities will come in the next 10 years. Clients know how to appreciate and evaluate a good professional and they seek top quality and professionalism. That’s precisely what we deliver and will continue to do.

OPINION

Extra Rights = Extra Responsibilities Ethics is needed in the way banking is conducted

O

rdinary people have suffered huge disruption to their lives through the loss of jobs and opportunities because of the colossal mistakes of self-declared ‘Masters of the Universe’ chasing ever-bigger financial rewards within the banking industry. To add insult to injury, the super-sized remuneration to supposedly attract ‘top-talent’ appears to make no difference to performance prospects when conditions take a turn for the worse. Instead, the message “We’re all in this together” is used to justify the phenomenon of nationalising unsustainable losses – but only after privatising all the profits. In short, ordinary taxpayers are made to pay for the costly mistakes of a few. Banks worldwide receive this special treatment, with its built-in ‘moral hazard’, because of the systemically important role they play for the efficient functioning of the modern economy. But extra rights should always be balanced with extra responsibilities. It is this principle that provides the moral imperative for a root and branch reform of corporate governance that pertains to banks. First, good governance must be holistic i.e. every stakeholder has a role to play to ensure it prevails. In reference to the UK’s banking crisis, the Report of the Parliamentary Commission on Banking Standards in the UK stated: “The behaviour of bankers was appalling, but regulators, credit rating agencies, auditors, governments, many market observers and many individual bank customers in their approach to borrowing created pressures in the same, and wrong, direction.” This can easily be applied to Cyprus too. Second, given the implications of a banking crisis on a wide range of stakeholders, the philosophy of maximizing shareholder wealth should be replaced with something more inclusive. According to the Parliamentary Commission “… directors of banks [should] attach the utmost importance to the safety and soundness of the firm and the duties they owe to customers, taxpayers and others in interpreting their duties as directors”. The Report further suggests “…to remove shareholder primacy in respect of banks, requiring directors of banks to ensure the financial safety and soundness of the company ahead of the interests of its members.”

The global banking crisis was caused by wrong motivations

By Petros Florides

Third, ethics must be at the centre of any new system of governance. For an industry that is so dependent on the trust and confidence of its customers, it is truly shocking how low banking standards have fallen. The UK’s recent Banking Standards Review summarizes the situation well: “…cultural norms in the banking industry shifted in the decades leading up to the crash. Dubious trading practices became ‘business standard’. The letter of the law came to matter as much as the spirit.” A good example in Cyprus is the number of unsuspecting purchasers of untitled property built on land accepted by banks as collateral for developers’ loans. Many of these loans are now non-performing – with the innocent buyer at risk of losing his home or investment. Fourth, any new system of governance must transcend the tired dichotomy of the UK’s principles-based “comply or explain” and the US’s rules-based “comply or else” approaches. Both have proven inadequate. An alternative could be the development of a set of mandatory ethical standards. These should be reinforced by supporting guidelines and best practice recommendations, and based on an “apply and explain, or else” approach. Fifth, directors’ legal duties should make explicit reference to their responsibility for ensuring ethical conduct in accordance with the abovementioned standards. Any subsequent failure with regard to this duty should lead to the personal liabilities of directors. In summary: new laws or regulations will not avoid a similar crisis in future if empty of sound ethics and values. Experience tells that the letter of the law will simply be used to provide adequate cover to engage in unethical practices. But, as seen in both the UK and Cyprus, a system based on voluntary principles lacks the necessary rigour and assurance. It is important to acknowledge the global banking crisis was not caused by a failure of imagination or resources - but by wrong motivations. After decades of focusing on the form that governance takes, it is now time to look deeply into its substance. An approach that instils ethics into the way banking is conducted is needed to recalibrate the industry for the better.

info: Petros Florides is Regional Governance Advisor for World Vision International, and Executive Officer of World Vision Cyprus. He is also on the board of the Institute of Directors (Cyprus), co-founder of the Cyprus National Advisory Council for the Chartered Institute for Securities & Investments, co-founder of the Institute of Risk Management Cyprus Regional Group, and a Chartered Management Accountant. The views in this article represent those of the author and not any other individual or organisation. THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES

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FAMILY OFFICES

64 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

Survival in the global business jungle is a matter of strict focus \UMHPSPUN ÄULZZL HUK P[ transpires, allowing MVY [OL ÅV\YPZOPUN VM MHTPS` VMÄJLZ. By Chloe Panayides

“B

y definition, a family office is intensely intimate. You are not just your client’s advisor, you are their confidant,” Andrei Narutsky, Managing Director of LEON Family Office declares. Following a day of exhaustive discussion and dialogue among public and private stakeholders at the 4th Nicosia Economic Congress, Narutsky and I take a seat in the expansive lobby of the Hilton Park Hotel. With talk of economic recovery in mind, fresh from the day’s discourse, our attention turns to this somewhat elusive entity: the family office. It is an increasingly ubiquitous term and there is a growing body of opinion that encouraging the introduction of family offices to the island would add an extra dimension to Cyprus’ wealth management product, giving it a competitive edge whilst simultaneously invigorating the local economy. It would constitute the opportunity – so to speak – to reap the lion’s share of a wealthy family’s value. But what exactly is a family office? Narutsky is the ideal person to ask: “A family office is incredibly niche and personal, dealing with the very specific requirements of ultra high-net worth individuals,” he tells

me. For LEON Family Office, that description “ultra high-net worth” refers to wealth far exceeding €100 million. Narutsky continues: “At LEON, we are concerned with investment advisory and personal financial planning for our clients. We act as their personal chief investment officer. For them, it makes sense to have an outsourced advisor as opposed to an ‘in-house’ advisor, purely because of the acutely high level of expertise needed to handle this level of worth. Further to an investment plan, our clients often require ancillary services, such as wealth structuring and coordination, succession planning, and more.” Designing bespoke strategies requires careful consideration of a client’s unique situation, assessing his/her long-term objectives that are thereafter factored into the overall investment plan. LEON’s particular model, Narutsky explains, is classic: that is, setting strategic goals, building a long-term investment strategy, and maintaining optimal asset allocation for the best risk/reward ratio. “We then implement and oversee the underlying investments, measuring performance and returns. Most of our clients are first-generation entrepreneurs and are therefore too busy

to be able to do this all by themselves.” And just how many clients does LEON have? “Currently, we service five families. We could go up to 12 and an absolure maximum of 15; above that, a multi-family office transitions into a private bank,” Narutsky states. Indeed, just how are the services of a family office distinct from those afforded by a private bank? “Well,” Narutsky begins, “A bank is a good platform for the custody and safekeeping of its clients’ assets but bankers usually do not see the whole picture of the family and cannot propose truly comprehensive solutions. Bankers work to specific templates imposed on them by their respective banks’ policies and they are likely to have a conflict of interest between their own short-term profit targets and the long-term interests of the client. With a family office, by contrast, there is absolutely no conflict of interest. We work solely in the best interest of the client, as opposed to the best interest of the bank, as well. We always start with the analysis of the longterm needs of the client and investments are chosen solely with this goal in mind.” Responding to the question of what qualities a professional must possess to be able to effectively run a family office, Narutsky

THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

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FAMILY OFFICES

replies: “At the end of the day, we are still in the service industry. Our clients are demanding and privileged. You have to be of the right calibre to match the qualities of the world to which they belong, both intellectually and nonintellectually. Professionalism incarnate, you must not only meet expectations, but surpass them every time, delivering your service to the highest standards, and in the timeliest manner possible.� Whilst there are a few single family offices in Cyprus – dealing, as the name suggests, with a single client – there is currently a lack of cohesive family office legislation, something that Narutsky credits as being the most pressing current impediment to Cyprus being able to effectively embrace this discerning practice. “Still,� Narutsky continues, “it is not the only aspect of the equation that needs to be addressed.� Elaborating, he says: “If we look at international locales that have successfully lured wealthy families to their shores – consequently supporting the operation of family offices – there are three key unifying components that stand out: lucrative tax regimes, lifestyle, and educational opportunities. “If we take lucrative tax regimes, Cyprus may be commended for its low corporate tax rate. However, it cannot compete with the likes of Monaco or the UK. The latter offers wealthy families ‘resident non-domicile’ status, meaning that they are not subject to being taxed on their entire global wealth, only on that generated within or brought into the UK.� Thus, Cyprus’ legislative amendments need to stretch further than merely defining the parameters of a family office. The island is perhaps in need of reassessing its branding, its identity, of how it would like to position itself on the international stage, altering its legislation accordingly.

for a wealthy family to locate itself in the jurisdiction of its respective trust. That’s why there are some single family offices in Cyprus. “LEON, likewise, has now introduced an office in Cyprus, because some of our clients have Cyprus-based structures.â€? So, now knowing what a family office can bring to a wealthy family, the questioning tide turns: what can a wealthy family bring to an economy? For many, surviving and thriving past the confines of the crisis is dependent upon attracting foreign investment to the island. Imagine, furthermore, the grace of a wealthy family relocating its livelihood here, commissioning an abode, furnishing it, maintaining it, travelling, shopping, and educating their children here: injecting capital, in essence, directly into the multifarious veins of the Cypriot economy. “Most of our clients are not aggressive risktakers: they want security, low-risk liquid investments, and to essentially beat euro-inflation – a range of 4%-6% return per annum. Therefore, from this perspective, Cyprus is not exactly the safest place at present for this type of investor,â€? Narustky explains. Just as bleakness seems to be about to blanket Cyprus’ investment picture, Narutsky identifies a lifeline, noting that the Government has introduced additional incentives that have drawn investors’ attention back to the island in the shape of the Cyprus citizenship scheme. “A year ago, the minimum investment was â‚Ź15 million; then it dropped to â‚Ź5 million, and now it stands at a very appealing â‚Ź2.5 million. The Government has successfully tapped into a wider community and we have already seen increased interest in investing in Cyprus from our clients.â€? These amendments, Narutsky maintains, have also provided greater clarity regarding what asset classes can be invested in so as to meet the

LEON FAMILY OFFICE

IN CYPRUS “W

ealth management is a complex mosaic of Ă„UHUJPHS PU]LZ[TLU[ [H_ SLNHS VWLYH[PVUHS HUK V[OLY PZZ\LZ HZ ^LSS HZ U\TLYV\Z YLSH[PVUZOPWZ ^P[O ZLY]PJL WYV]PKLYZ ;OL ILZ[ WYHJ[PJL MVY H ^LHS[O` MHTPS` PZ [V \ZL H WLYZVUHS THUHNLTLU[ JVTWHU` JHSSLK H MHTPS` VɉJL ;OL THPU M\UJ[PVU VM H MHTPS` VɉJL PZ [V HJ[ HZ H Ă…L_PISL HUK LɉJPLU[ I\ZPULZZ Z[Y\J[\YL [OH[ JHU KLHS ^P[O HSS Z\JO PZZ\LZ HUK YLSH[PVUZOPWZ PU H OPNOS` WYVMLZZPVUHS THUULY 3,65 -HTPS` 6ɉJL PZ `V\Y ZPUNSL WVPU[ VM JVU[HJ[ HUK JLU[YL VM JVVYKPUH[PVU VU HSS ^LHS[O THUHNLTLU[ PZZ\LZ 3,65 -HTPS` 6ɉJL VɈLYZ [OL ^OVSL ZWLJ[Y\T VM MHTPS` VɉJL ZLY]PJLZ! P PU]LZ[TLU[ HK]PZVY` HUK PP ^LHS[O JVVYKPUH[PVU >L OH]L Q\Z[ VWLULK HU VɉJL PU *`WY\Z ^P[O VUL M\SS [PTL LTWSV`LL HUK VUL *`WY\Z SVJHS KPYLJ[VY 6\Y THPU VɉJL PZ PU 4VZJV^ >L OH]L ZP_ M\SS [PTL LTWSV`LLZ [OLYL >L HYL PU [OL WYVJLZZ VM YLJLP]PUN H *0- SPJLUZL [V IL HISL [V WYV]PKL PU]LZ[TLU[ HK]PZVY` ZLY]PJLZ PU *`WY\Z (SS V\Y JSPLU[Z OH]L JLY[HPU WHY[Z VM [OLPY Z[Y\J[\YLZ IHZLK PU *`WY\Z :VTL VM V\Y JSPLU[Z HSZV OH]L PU]LZ[TLU[Z PU *`WY\Z Z\JO HZ YLZPKLU[PHS HUK JVTTLYJPHS YLHS LZ[H[L *`WY\Z IVUKZ HUK IHUR KLWVZP[Z š

ning to launch a collective investment scheme around September-October 2014. “We will join forces with a reputable investment management firm in Cyprus, and raise a minimum of â‚Ź12.5 million from at least five investors for citizenship purposes. Thereafter, we will invest the capital, primarily in commercial and residential real estate and Government bonds, and we will monitor and oversee the development. The introduction of this new collective investment scheme has received a very positive response among existing and prospective clients,â€? Narustky reveals. A ray of hope on the horizon, no doubt; still, Narutsky reminds us that with immense challenges remaining, there is no space or place for complacency. “I’m thinking,â€? Narutsky says, “in terms

PROFESSIONALISM INCARNATE, YOU MUST NOT ONLY MEET EXPECTATIONS BUT SURPASS THEM EVERY TIME Turning to lifestyle, Narutsky says resolutely: “Luckily for Cyprus, it inherently fulfils the lifestyle aspect of the family office equation: 300-plus days of sunshine, beautiful beaches, mountainous landscapes, and more. And, regarding education – our wealthy clients place great emphasis on this, many choosing to send their children to high calibre schools in the UK – Cyprus can adequately accommodate schoolchildren up until a certain age.� Where wealthy families base themselves is also, Narutsky explains, inextricably tied with where their structures are. “It often makes sense

citizenship criteria (most notably, Government bonds and euro bonds, which are very popular with sophisticated wealthy individuals). Embedding the citizenship scheme within a practical example, Narustky states: “Let’s say that an investor’s liquid net worth is â‚Ź25 million, and he is pursuing a diversified portfolio. Now, with the refreshed citizenship scheme, it is not a huge risk to allocate 10% – equating to â‚Ź2.5 million – to Cyprus: even if the investment doesn’t perform monetarily well, there are significant non-financial benefits.â€? It transpires that LEON is actually plan-

66 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

of the non-performing loans. This is a big concern for international investors. One of the mandatory requirements of the citizenship scheme is the buying of residential property. But considering the high level of unresolved NPLs, this presents an issue. Investors are wary of buying property now, afraid that the prices are acutely inflated, and that they will fall dramatically once the NPLs are dealt with. They don’t want to buy property for ₏500,000 million now, only to find that their investment has significantly lost its value in a few years’ time.�

IF AT FIRST

ENTREPRENEURSHIP

Martin Luxemburg, co-founder of the Erasmus Centre for Entrepreneurship (ECE) and a member of the management team, was in Cyprus last month for the kickoff event for November’s Global Entrepreneurship Week, the world’s largest celebration of the innovators and job creators who launch startups that bring ideas to life, drive economic growth and expand human welfare. Luxemburg spoke to Gold about the aim and work of the ECE as well as his assessment of Cyprus’ decision to join 137 other countries in Global Entrepreneurship Week and why there is no shame in failure.

G

old: Tell us something about the history and purpose of the Erasmus Centre for Entrepreneurship (ECE). Martin Luxemburg: Erasmus University Rotterdam was founded in 1913 by three Rotterdam entrepreneurs who had a vision of creating a specialised educational programme focusing on the needs of entrepreneurs and the business community. Over the years that followed, the focus of the Erasmus University remained on entrepreneurship education and, in 2013, exactly one hundred years later, the Erasmus Centre for Entrepreneurship (ECE) was launched in order to maintain the University founders’ century-old ambition to empower entrepreneurs. The ECE focuses on bringing business and academia closer together. We teach new skills, add new knowledge through research and we empower entrepreneurs to put their skills and knowledge into practice and use the university’s network. The ECE now has a total of 23 researchers, including two full professors of entrepreneurship, 30 staff members and a study association with 50 commissioners.

Gold: How did you come to be one of the co-founders? M.L.: In 2011, my colleague, Hendrik Halbe (director of the centre) and I were asked by the University to help support a large government entrepreneurship programme that would further improve entrepreneurship education and create more awareness among students within the region. At the time, most activities, educational and incubator programmes within the University were not jointly coordinated, which created gaps for students and startups when they wanted to take the next steps toward business and entrepreneurial growth and development. We saw this as a great opportunity to combine and connect all the related activities and programmes to create a real ecosystem for entrepreneurship within the University and the surrounding region. With the support of the deans of the two largest faculties within the University, the Rotterdam School of Management (RSM) and Erasmus School of Economics (ESE), we were able to set up the university-wide centre for entrepreneurship in 2013.

YOU DON’T SUCCEED…

68 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

By John Vickers

Gold: How does the Erasmus Investment Fund work? M.L.: The University has a large number of alumni who went on to become successful entrepreneurs. Many of them are enthusiastic about helping young entrepreneurs grow their businesses and, at the same time, they have stated their willingness to invest in these companies and create an alternative source of funding for young entrepreneurs, who can sometimes struggle to acquire early stage funding through more traditional sources. We are currently testing the waters of what the exact structure of the fund should be and we are considering adding the element of crowdfunding too. So people in the Netherlands can co-invest together with these entrepreneurs in the next generation of startups.

Gold: You say on the ECE website that “We believe that society faces challenges that can only be solved with an entrepreneurial approach”. What kind of challenges are you talking about? M.L.: Current major challenges like the food supply, clean water management and pollution but also future challenges in terms of energy supply and aging populations. These are big topics, of course, but we believe that we can only solve (or add to the solution of) these problems, with entrepreneurs creating radical solutions. Gold: What are your Corporate Partnerships about? M.L.: We have the ambition to become the Number 1 expert centre on entrepreneurship

IT’S GREAT THAT CYPRUS TOOK THE INITIATIVE TO FOCUS MORE ON ENTREPRENEURSHIP AND ACKNOWLEDGE IT AS AN IMPORTANT FACTOR IN STIMULATING THE ECONOMY Gold: Will it support only Dutch/Rotterdam-based startups? M.L.: While we are passionate about supporting and empowering startups and entrepreneurs in Rotterdam, with an emphasis on Erasmus University alumni, we strive to empower all entrepreneurs over the world, regardless of their geographical location and educational background. For example, many of our programmes have participants who originate from all over the Netherlands. We also take a proactive approach when it comes to connecting and working with startups located outside Rotterdam. One example of this is our education programme that runs in seven cities in the Netherlands or our worldwide investment battle Get in the Ring (GITR) that now runs in 60 countries. GITR is an international investment competition that lets startups from around the world compete for an investment of up €1,000,000. Participants compete in a series of rounds and the finalists are flown to Rotterdam where they compete in the international finals in November during Global Entrepreneurship Week.

in Europe in the fields of research, education and services for starting, growing, and renewing companies. As part of this ambition, we connect with corporate partners to strengthen our activities and network. We wish to create optimal value and we achieve this by providing our partners with the opportunity to acquire knowledge and training that will make them more innovative and entrepreneurial. Partners are also able to connect with young startups. These connections often provide our startups with business mentorship and coaching from our partners. They provide brand association for both the startups and our corporate partners and serve to create a positive societal impact through knowledge sharing. Gold: You were in Cyprus in May for the kickoff event for Global Entrepreneurship Week. What was your experience of it? M.L.: First of all I think it’s great that Cyprus took the initiative to focus more on entrepreneurship and acknowledge it as an important factor in stimulating the economy. This first step is really important. Don’t forget that in the Netherlands we have had entrepreneurship

programmes since 2004. My main observation is that Cyprus has gone through a difficult period and is struggling to get out of it so people are still a little sceptical about the entrepreneurship movement and Global Entrepreneurship Week. They have questions such as what is it about and how they can benefit. My belief is that with the support and experience of countries like Greece and the Netherlands, we can turn this around and show the power of entrepreneurship in Cyprus. Gold: Can projects such as Global Entrepreneurship Week really have an impact? How? M.L.: Global Entrepreneurship Week started in 2007 with only 37 participating countries, and now, 7 years later, 138 countries are involved. It makes a real impact because it is a powerful tool that shows and emphasizes the importance of entrepreneurship and eventually we see how a country pursues its activities. For us, it helped us to grow Get in the Ring from a local event to a global competition. Gold: Does a recession affect entrepreneurship negatively or can it be used as an incentive to work better and harder? M.L.: That’s a difficult question because other factors have to be taken into account. My personal opinion (with some academic research backing) is that a recession will positively affect entrepreneurship because people have to become more creative and entrepreneurial to start and grow a business. In a recession you see businesses going bankrupt, which is a negative thing of course, but it will also help others work harder to make their own business a success. When you start a business during a recession, you actually have a better chance of succeeding in the future. Gold: Do you have a favourite ECE Success Story to share with us? M.L.: There are a lot of success stories all over the world, including some in Cyprus, as we heard during the presentations at the kick-off event. I like to emphasize the fact that we believe in trying several times to become a success story. There are examples of entrepreneurs who succeed the first time but most entrepreneurs end up having a successful company after trying several times. The main problem is that people think they have to become successful the first time and if they fail it’s something to be ashamed of. We want people to think of it as a learning experience when setting up a business. If the first two fail, it’s OK and the third one will probably work because of the experience you have gained through your first two attempts.

THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

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TESTING

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TIMES As Europe’s banks prepare to undergo rigorous stress tests, all sectors of the economy are being tested, some to their limits. George Theocharides, Associate Professor of Finance at the Cyprus International Institute of Management, gives an expert overview of the present situation, what led to it and how Cyprus can return to growth.

T

By Chloe Panayides, Photograph by Jo Michaelides

uesday morning, 10am. I make my way to the Cyprus International Institute of Management (CIIM) for what has (naively, it transpires) been designated as a one-hour meeting with George Theocharides, Associate Professor of Finance & Director of MSc Financial Services. As people await the approaching bank stress tests and wonder how the outcome might affect the economy, ponder problems of the past (Could the Eurogroup decision have been handled

better?) and options for the future (From where else could financing be sought apart from the banks?), it seemed prudent to seek the opinion of a seasoned academic for a clear grasp of where Cyprus’ economy stands at present. It soon became apparent that fathoming the depths of an academic’s knowledge takes far more than one hour; and so it is that Theocharides led me artfully through a tour de force of ideas, giving new meaning to the phrase, ‘knowledge is power’.

Gold: The term ‘stress test’ has been ubiquitous of late. What is the process and purpose of these tests? George Theocharides: The European Central Bank (ECB) is preparing to take on new banking supervision tasks as part of the Single Supervisory Mechanism (SSM), conceived as being able – through consistency and integration – to restore confidence in the supervision of all systemic banks in the eurozone. This will begin from November 2014. Thus, 124 systemic EU banks will go through these so-called stress tests as a precaution. The idea is to ensure that the banks are well-capitalised and can sustain themselves through adverse conditions if these occur in the future. The actual process is two-fold: there will be an asset quality review, looking at balance sheets, and correcting them; and the ‘stress’ test itself, whereby the bank will be given a hypothetical scenario and has to prove that it could sustain itself under these adverse conditions. The base scenario that has been proposed more or less correlates with the macroeconomic outlook predicted by the Troika of international lenders for Cyprus,

CYPRUS

while the adverse scenario is worse and assumes a greater level of recession, unemployment, as well as fall in the value of real estate (collateral) in the coming years. The banks will be given six months to find the necessary capital if needed for the base scenario (a minimum capital ratio of 8%), and nine months for the adverse scenario (a minimum capital ratio of 5.5%). Gold: Some have criticised the stress tests for being too strict. Do you agree? G.T.: Ultimately, we must create resilient banks, so that depositors and investors feel secure again. Stability will inspire trust, and this is imperative, especially with what has happened recently in Cyprus as well as to many other banks around the world. In the past, such stress tests might not have been that strict, and there were instances where banks would pass even though they weren’t – in practical terms – resilient enough. As a consequence, they ended up needing capital in a relatively short period of time after the tests. Some banks, unable to find the necessary capital from private investors, ended up becoming nationalised because they were considered “too big to fail”. In the case of Cyprus the decision was to convert uninsured deposits into capital, because the banks were “too big to save”! The stricter the tests, the more confidence will be inspired and, consequently, there’s a greater chance of investors and depositors becoming active again. Gold: Is there any danger of the Cypriot banks failing the stress tests? G.T.: Bank of Cyprus, Hellenic and the Cooperative Central Bank – the three banks undergoing the stress tests – have all recently been re-capitalised: Bank of Cyprus through the participation of its existing shareholders, holders of bonds, and the uninsured depositors; Hellenic Bank has done it through private investors, while the Cooperative Central Bank received government funds. If they still need capital, there is an extra €1 billion from the Memorandum of Un-

AT SOME POINT, PROBLEMATIC ASSETS (NPLS) MUST BE MOVED TO AN ASSET MANAGEMENT COMPANY THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

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THE GLOBAL FINANCIAL CRISIS THAT STARTED IN 2007 WAS CERTAINLY A MAJOR UNDERLYING REASON BEHIND OUR COUNTRY’S PROBLEMS derstanding (MoU) signed with the Troika set aside with the purpose of being allocated for the recapitalisation of banks, as well as sources of capital from private investors. If we look at what happened recently with the successful recapitalisation of Greek banks and of a number of other banks in Europe, there is optimism that our own banks can source the necessary capital (if needed). There is an “appetite” for risk these days from funds abroad, as interest rates across the globe are extremely low and people are looking for investments that would provide them with higher returns (although these investments can come with higher risk). Furthermore, because of the quantitative easing programmes (QE) that have been going for some time now (especially in the US), there is ample liquidity these days in financial markets and investors are looking to the peripheral countries of Europe to invest.

practices, which resulted in massive loans given out based on the value of the collateral (mainly real estate) rather than the debt-repayment capability of the loan holder. These loans have proven to be problematic during the economic downturn and their value has sharply fallen as property and land lost value and became illiquid. Then there was the overexpansion of the balance sheet of our banks which, at some point, reached a level of eight times the country’s GDP. Our main banks had been attracting lots of deposits (domestic and foreign) by providing high deposit rates and lending them out as risky loans (mainly to the construction and real estate sector, creating a real estate bubble) or investing them in risky products (Greek government bonds). This over-expansion of the balance sheet created extremely high levels of individual indebtedness, reaching almost 300% of our GDP!

Gold: What, in your estimation, were the main problems of the past? G.T.: There are multiple reasons why our economy ended up in this very difficult and unpleasant situation. There were both fiscal and banking problems, and the interaction of these proved catastrophic. I would said, for example, the indecisiveness by Government officials and politicians to take the necessary action to fix the fiscal imbalances of the last few years and the growing public debt, as well as the long-standing structural problems of our economy (health care reform, pension reform, tax compliance and collection, labour market reform, to name a few). There were many warning signs, e.g. the continuous downgrades by the rating agencies, the reports by the European Commission, the fact that we could no longer borrow from the foreign markets to re-finance our debt after March 2011, etc. Unfortunately, we failed to act properly on these multiple warnings. Instead, we resorted to a €2.5 billion, 5-year loan from the Russian Federation in December 2011, instead of taking all the necessary measures to fix our problems and return to the foreign financial markets.

Gold: The exposure to Greek bonds has been blamed for a great deal. G.T.: Yes. Risky investment decisions mainly in Greek government bonds resulted in massive losses of around €4.5 billion, i.e. 25% of the country’s GDP. There was obviously a lack of proper risk management, as the risk was not hedged properly (for example, by buying credit insurance products such as credit default swaps, or selling some of the exposure when Greece’s bonds were given junk status by the rating agencies). There was also no proper diversification, as almost all of the capital of our two main banks was invested in these products. Here, of course, is a classic example of moral hazard, i.e. bank executives were taking risky investments knowing that, in case of a negative outcome, the burden would not fall on their shoulders. On the contrary, in case of a positive outcome, they would reap the rewards in the form of big bonuses. Over-exposure was not limited to the Greek economy either. It also occurred in other foreign markets such as Russia, Ukraine and Romania where the banks did not have particular knowledge or expertise. In the end, their expansion into those countries also created huge losses.

Gold: What about the problems in the banking sector? G.T.: There were several banking-related problems. Firstly, there were bad banking

Gold: Doesn’t it all come down to a lack of proper governance? G.T.: Yes. Good corporate governance prac-

72 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

tices create shareholder value through the transparent disclosure of an organisation’s activities to its shareholders, holding directors accountable, and creating an effective two-way communication between the board and the shareholders. Unfortunately, it failed in this case and this should prove an important and useful lesson not only for our banks but for a number of other organisations in Cyprus. Furthermore, the rather loose regulatory supervision by the Central Bank of Cyprus allowed individual banks, as well as the overall banking sector, to dwarf the GDP of the country, and to take excessive risks without properly diversifying their portfolio. It’s ironic that people kept praising the regulatory authorities for protecting the banking sector from toxic products such as asset/mortgagebacked securities, collateralised debt obligations (CDO) and credit default swaps (CDS) at the height of the global banking crisis of 2007-2009, products that led to the collapse of banking and insurance giants all over the globe, such as Lehman Brothers, AIG, or Bear Sterns. Then, a few years later, we discovered that the simplest of the securities and supposedly the least risky (sovereign bonds) were to prove so fatal that they brought the country’s banking sector to its knees. The global financial crisis that started from the US in 2007 and eventually spread to Europe in the form of a sovereign debt crisis was certainly a major underlying reason behind our country’s problems. This highlights the impact of globalisation and how contagion effects can propagate financial crises from one region or country to another. Gold: And, consequently, Cyprus had to request help from the Troika. G.T.: From May 2011, Cyprus could no longer borrow from the foreign markets mainly because of the lack of fiscal discipline that had created substantial budget deficits in the preceding years and growing public debt. At that point, the problems with the banks hadn’t yet surfaced. Then, in the summer of 2011, there was the explosion at Mari which had its own negative economic impact on our economy. Later that year, we had the infamous PSI (public sector involvement) in Greek government debt (at about 80% of the nominal value). This decision, and our failure to agree on the recapitalisa-

CYPRUS

tion of our banks in the way Greece did for its banking sector, resulted in massive losses for our two main banks (about €4.5 billion). The banks then engaged in a race to attract new capital. Cyprus Popular Bank (Laiki), unable to attract the desired capital from private investors, had to seek Government help. However, as Cyprus could not borrow from foreign financial markets, it applied for financial support from the Troika in June 2012. Unfortunately, the negotiations on the Memorandum of Understanding lasted for far too long. Other countries embroiled in bailout programmes signed their respective MoUs within a few weeks of being excluded from the foreign markets. It took Cyprus almost two years from May 2011 until April 2013! Admittedly, the Eurogroup’s decisions could have been handled better. There should never have been an original decision for a haircut on insured deposits, and perhaps if the decision was for a bigger haircut on the uninsured deposits of all banking institutions, rather than just Bank of Cyprus and Cyprus Popular Bank (Laiki), this might have been a better choice with a more positive outcome. I think there had been plenty of other options in previous years to avoid such devastating decisions, but not in March 2013 – it was too late at that point. Gold: Could we have negotiated better with the Troika? G.T.: When negotiating with the Troika, I believe that we should have looked to the Irish example. Ireland, before even signing its MoU, created NAMA, the National Asset Management Agency, which took the socalled bad loans from all six banks plagued by problems. The same thing happened in Spain with SAREB, where assets were transferred from the four nationalised Spanish financial institutions. We should have done the same in Cyprus. In collaboration with EU officials, we could have created an asset management company, which would have unburdened the banks enough to allow them to function properly and support the economy. Gold: Some feel that what happened changed the course of history regarding financial institutions. G.T.: Well, the Troika’s intention was to break the link between banking problems and governments which had been in place until

then, with governments rescuing banks at the taxpayer’s expense as and when necessary, raising public debt and making it unsustainable. From 2016, what happened to Cyprus will become the norm across all European banking institutions. Shareholders will be compelled to pay first, followed by debt-holders, and then uninsured deposits. The theory is that it will put pressure on the banks to get their act together. Gold: Will it also change the way that people bank? G.T.: I think it will cause people to look to other sources of investment. Instead of putting all of their money in the bank, they will start thinking about diversification, which implies investment in other assets such as real estate or the capital markets (stocks, bonds, mutual funds, commodities, etc.). According to recent statistics, the US, which is a mature, developed financial market, gets 80% of its financing from capital markets; in Cyprus, we get almost all of our financing from banking institutions. This gradually has to change. Cyprus needs to start developing a healthy capital market. Gold: Will greater education be needed to ensure this development? G.T.: Yes. Generally speaking, people need to become more financially literate. Given the experience of the past (the crash of the stock market, the collapse of the main banks), people will inevitably start asking more questions. This has to come from a young age, with this form of education being integrated into school systems. I’m a huge proponent of a personal finance course and this should be a mandatory class at least at undergraduate level. Gold: Moving forward, what options do we have? G.T.: We need to continue with the reforms agreed under the MoU – correcting fiscal imbalances and long-standing structural problems, and restructuring the banking sector. A lot has happened in the last year and I think we are on the right track but much more still needs to happen in the near future, and some difficult decisions will have to be taken. At the same time, the Government needs to be more aggressive (and faster!) with measures to compensate the negative effects

of the Memorandum and promote growth following specific intermediate plans. Such measures should place more emphasis on innovation and entrepreneurship – a lot can be learned from our neighbour, Israel – and we should diversify and look to other areas of employment (e.g. the construction of a technology park) and, of course, there are always the prospects from natural gas and other sources of energy. As I noted earlier, we need to consider alternative forms of financing outside of the banking sector (non-bank financing). On the banking side, it seems that the banks are now considering extracting further capital from the markets to increase their capital ratio ahead of the stress tests. It’s probably a wise move. Banks in Greece and other parts of Europe are recapitalising as foreign private investors have cash – it’s in the market due to the quantitative easing programmes – and they’re looking for investments with good returns. They have an appetite for risk and it would be good if our banks could take advantage of this. Gold: The problem of non-performing loans (NPLs) is clearly not going to go away. G.T.: In my view, at some point, problematic assets (NPLs) must be moved to an asset management company, at least for Bank of Cyprus. This will give the banks the breathing space they need to allow them to adequately finance the economy again. An asset management company would buy the NPLs at a discount price, seek private financing for some viable loans and, at the same time, have a longer horizon for dealing with them. The EU needs to help us in some manner with this, as it did in the case of Spain and Ireland. Finally, the legal framework relating to insolvency, the financial intermediary, as well as the ability of the banks to seize collateral in a relatively short period of time for loans moved to recovery needs to be put in place, sooner than later. I am in favour of protecting a person’s primary residence but only in special cases and in accordance with certain criteria. I also believe that the banks need to lower lending interest rates as part of the restructuring of problematic loans; it’s impossible for individuals and companies to be able to pay such high interest rates on their loans in the midst of a serious financial crisis. Growth – and for some businesses, survival – is being impeded.

CYPRUS NEEDS TO START DEVELOPING A HEALTHY CAPITAL MARKET THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

Gold 73

{June 14 – July 13, 2014}

ISSUE

39

83

+ BOOK REVIEWS MONEY: The Reckoning: Financial Accountability and the Making and Breaking of Nations By Jacob Soll

76

{money}

76 Where is the cheapest place to buy citizenship? 77 New Russia sanctions “catastrophic for Cyprus” Interview with Foreign Minister Ioannis Kasoulides

78

{business}

€

78 Strong Sense of Purpose Leads to Growth Results of a new Deloitte survey 79 Looking at 2040 It will take a quarter of a century until about one-third of incoming CEOs in the world’s largest companies are women. 80 Skills Gap Hampers Recruitment 63% of organisations are concerned that they won’t be able to find the people with the skills they require.

77

BUSINESS: Essentialism: The Disciplined Pursuit of Less By Greg McKeown 80

81 No Stone Left Unturned Financing SMEs in Cyprus

ECONOMY: Economics: The User’s Guide: A Pelican Introduction By Ha-Joon Chang 82

82

{economy}

TAX & LEGAL: Patent Law in Global Perspective By Ruth L. Okediji & Margo A. Badley 85

82 Three Challenges Cyprus’ economic programme is given a fourth green light by the Troika but work still remains to be done.

LIFESTYLE: The Luminaries ton By Eleanor Catton

89

83 European Commission Assesses the National Reform Programme for Cyprus

84

{tax&legal} l}}

84 Tax Risks Accelerating Worldwide EY survey finds companies concerned about the potential for BEPS “tax chaos” 85 Tax News New Cyprus-Spain Double Tax Treaty Comes Into Force / Amendments to the Capital Gains Tax Law

86

{lifestyle} le}

86 Two Wheels Good Investing in Motorcycles 90 A Day In The Life Thomas Kazakos

THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES OF CYPRUS

Gold 75

investment

{MONEY}

New Russia SANCTIONS

“CATASTROPHIC FOR CYPRUS”

C

yprus’s economic ties with Russia, which include about $100 billion in investments between the two countries, could be severed if the European Union applies a third round of sanctions over Russia’s role in the Ukrainian unrest, Cypriot Foreign Minister Ioannis Kasoulides said in an interview with Bloomberg on 2 June.

Cyprus’s economy, the third smallest in the euro area, shrank by 5.4% last year under the weight of austerity measures and restructuring of the financial industry required by international creditors in return for a €10 billion rescue. The Cypriot government has prioritized energy as a growth industry to help restart the economy. The discovery of natural gas in the eastern Mediterranean is at the heart of Cyprus’s foreign and economic policy, Kasoulides said, and there is “great scope” for Cyprus, Lebanon, Israel, Palestine and Egypt to cooperate in energy. CYPRUS IS THE ONLY “Cyprus is the only country which is part COUNTRY WHICH IS PART of the region, but not party to the probOF THE REGION, BUT NOT lems of the region and can therefore play a PARTY TO THE PROBLEMS useful role,” Kasoulides said. OF THE REGION The first priority in energy is to build a liquefied natural gas terminal on Cyprus’s southern coast after Noble Energy Inc. last year discovered as much as 5 trillion cubic vestment at $33 billion, according feet of natural gas off the coast, Kasoulides to the Moscow-based Federal Statistics said. While the finding isn’t enough to Service. Low tax rates and a treaty to premake a project viable on a standalone basis, vent double taxation have made Cyprus the plant could be used for exporting gas the conduit of choice for Russians moving from elsewhere in the region, including money in and out of their country. from Israel. At the end of May, EU leaders put off Total SA and Eni SpA are also due to further sanctions on Russia after President begin exploring for additional deposits in Vladimir Putin showed a willingness to Cypriot waters this summer, Kasoulides work with Ukrainian President-elect Petro Poroshenko. The EU will continue prepar- said. As European nations look for ways to cut ing measures if events require further steps, reliance on Russian energy, “this enhances they said. the opportunities for Cyprus, but we still While Cyprus’s Ukraine policy doesn’t need to wait to see about Europe’s plan for diverge from the EU line, communication sourcing alternative supplies of energy so between the EU and Russia “must be kept open and the solution must be diplomatic,” that we can adapt ourselves accordingly,” Kasoulides told Bloomberg. Kasoulides said.

While EU and US sanctions in response to Russia’s annexation of Crimea have so far had limited impact on Cyprus, a new set of measures “introduced in a blanket way, would have a catastrophic effect on Cyprus’s economy and many other EU states,” Kasoulides said. Cyprus is the biggest foreign investor in Russia, with $69 billion accumulated at the end of last year, while the island is the second-biggest destination for Russian in-

76 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

citizenship

Where is the

cheapest place

{MONEY}

to buy citizenship?

I

t is a clichĂŠ used from Bond to Bourne: the classic spy image of a suitcase filled with cash and multiple passports for a quick getaway. But increasingly it is not spies that are looking for a second passport, but a growing number of “economic citizensâ€?. In January, Viviane Reding, vice-president of the European Commission, said in a speech: “Citizenship must not be up for saleâ€? but according to a BBC report, every year several thousand people spend a collective â‚Ź1.5 billion to add a second, or even third, passport to their collection. The report quotes Henley and Partners citizenship expert Christian Kalin, who helps to advise clients on the best place to spend their money. “Just as you diversify an investment portfolio, you want to diversify your passport portfolio,â€? he says. The option has proven popular with Chinese and Russian citizens, as well as those from the Middle East, says the BBC, noting that in the past year alone, new programmes have been introduced in Antigua and Barbuda, Grenada, Malta, the Netherlands and Spain that either allow direct citizenship by investment or offer routes to citizenship for wealthy investors. The BBC refers to so-called “Golden Visasâ€?, noting that some countries do not offer citizenship for purchase outright, but do offer residence permits to wealthy individuals. These residence permits can eventually lead to citizenship in Portugal, Australia, Belgium, the UK, the US, Singapore and Spain. By far the cheapest deal for citizenship is on the tiny Caribbean island of Dominica.For an investment of $100,000 plus various fees, as well as an in-person interview on the island, citizenship can be bought. Since Dominica is a Commonwealth nation, citizens get special privileges in the UK, and citizens can also travel to 50 countries, including Switzerland, without a visa. Similarly, the Caribbean islands of St Kitts and Nevis have the longest running citizenship-by-investment programme (CIP) in the world, which was founded in 1984. There are

CYPRUS IS A GOOD EXAMPLE OF HOW NOT TO DO IT – YOU BRING A PRODUCT TO MARKET AND TOTALLY MISPRICE IT AND IT GETS CHEAPER EVERY SIX MONTHS two methods to obtain citizenship, with the cheapest option being a $250,000 non-refundable donation to the St Kitts and Nevis Sugar Industry Diversification Foundation, a public charity. A second option involves a minimum $400,000 investment in real estate in the country. Kalin of Henley and Partners, which helped to set up the programme, says that while the programme has its issues, “St Kitts is relatively well run – it’s in a way a model.â€? He adds that Caribbean locations are good for interim passports for “global citizensâ€? who are looking to eventually establish themselves via investments in other “economic citizenshipâ€? programmes like those in Portugal or Singapore. For those wishing to gain citizenship of an EU member state, Malta and Cyprus are the two main options. The BBC notes that Malta came in for fierce criticism last year when it announced plans to allow wealthy foreigners to obtain a passport for a â‚Ź650,000 investment with no residency requirement, which would have made it the cheapest European Union (EU) nation in which to purchase citizenship. Prime Minister Joseph Muscat had estimated about 45 people would apply in the first year, resulting in â‚Ź30 million in revenues. After pressure from EU officials, Malta changed the rules to require potential passport holders to reside in Malta for a year and raised the investment to â‚Ź1.15 million. In Cyprus, which also offers a direct citizenship-by-investment route, the cost of the programme was slashed to â‚Ź2 million in March, “partially in an effort to placate mostly Russian investors who lost money when Cyprus was forced to accept a strict European Union bailout,â€? according to the BBC. It correctly notes that the â‚Ź2 million figure applies when one

BOOK REVIEW THE RECKONING RECKONING: C O G FINANCIAL ACCOUNTABILITY AND THE MAKING AND BREAKING OF NATIONS BY JACOB SOLL (ALLEN LANE, 2014)

W

R.R.P. ÂŁ20.00 (ÂŁ13.40 FROM AMAZON.CO.UK)

ho would imagine that a history of accounting and doubleentry bookkeeping could be so engaging? Yet in this concise, sharply argued book, award-winning historian Jacob Soll deftly examines and explains the remarkable impact that the practice of accounting has had on the rise – and sometimes the fall – of nation states. Soll ZOV^Z OV^ [OL \ZL HUK TPZ\ZL VM ÄUHUJPHS bookkeeping has determined the fates of entire societies. Time and again, he reveals, good and honest accounting has been a tool to build successful companies, states and empires. Yet when it is neglected or falls into the wrong hands, accounting has contributed to cycles of destruction that continue to this day. Combining rigorous scholarship and fresh storytelling, The Reckoning [YHJLZ [OL Z\YWYPZPUNS` WV^LYM\S PUÅ\LUJL VM HJJV\U[PUN VU ÄUHUJPHS HUK WVSP[PJHS stability, from the powerful Medici bank in [O JLU[\Y` 0[HS` [V [OL ÄUHUJPHS JYPZPZ Perhaps some rather old lessons from the surprisingly exciting history of accountancy can help us deal today with what are not so very new problems after all.

invests as part of a larger group whose collective investments total more than â‚Ź12.5m; an investment of â‚Ź5m in real estate or banks is still required for an individual. Kalin, however, cautions against a Cypriot investment, noting that the programme initially cost â‚Ź28 milllion, then â‚Ź10 milllion, then 5 million. “It’s a good example of how not to do it – you bring a product to market and totally misprice it and it gets cheaper every six months. It is ridiculous,â€? he says.

THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

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survey

DELOITTE:

{BUSINESS}

Strong Sense OF PURPOSE

Leads to Growth

T

he 3rd annual Deloitte Core Beliefs & Culture survey has revealed that organisations with a strong sense of purpose – described as “a focus on making a positive impact on customers, employees and society in general” – are more confident about their growth prospects, more likely to invest in initiatives that lead to long-term growth, and enjoy higher levels of confidence among key stakeholders. According to the results of the survey, 82% of respondents (executives and employees) who work full-time for an organisation with a strong sense of purpose say that they are confident that their organisation will grow this year, compared to 48% of those who do not have a strong sense of purpose. The survey identified similar gaps in levels of confidence when it comes to increasing investments in new technologies, developing new products and services, hiring and expanding into new markets. “A lack of business confidence has been a hindrance to economic recovery,” says Punit Renjen, chairman, Deloitte LLP. “Through our surveys this year and last, evidence is mounting that focusing on purpose rather than profits is what builds business confidence. This is a critical finding – and underscores the significant impact that a ‘culture of purpose’ can play in fostering a thriving business community.” When respondents were asked to name the top driver of confidence in their organisation’s growth potential, those working for an organisation with a strong sense of purpose named commitment to delivering top quality products/services. For those

working for an organisation without a strong sense of purpose, the leading driver of confidence is focus on the bottom line. A similar trend emerged when respondents were asked about the priorities of their leaders: In organisations with a strong sense of purpose, the top priority is making a positive impact on clients; in those without a strong sense of purpose, the top priority is meeting short-term financial goals. Furthermore, respondents who work for organisations with a strong sense of purpose are more than twice as likely to say that their organisations plan to invest more in employee development and training in 2014.

IN TODAY’S ELEVATED THREAT LANDSCAPE,

IT IS CRITICAL

THAT ORGANISATIONS RETHINK THEIR SECURITY STRATEGY They also have higher levels of employee engagement: nearly three quarters (73%) of respondents who work for an organisation with a strong sense of purpose indicate that the organisation’s employees are fully engaged versus 23% at organisations without a strong sense of purpose. Moreover, 74% say that employees are provided the tools and resources to realise their full potential, compared to 19% for those that don’t have a strong sense of purpose. “The differences are telling,” notes Renjen. “Organisations with a strong sense of purpose are buoyed by factors that are non-financial and more intangible, with a

78 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

longer horizon for positive returns. Other organisations are often driven by shortterm financial gain. To rebuild and sustain business confidence, organisations that want to be exceptional must take the long view and invest for growth.” The survey findings also indicate a link between organisational purpose and stakeholder confidence. Some 81% of respondents working for organisations with a strong sense of purpose say their stakeholders trust their leadership team; 74% say their investors are confident in the organisation’s growth prospects over the next year. For organisations that do not have a strong sense of purpose, the comparable findings are 54% and 52%, respectively. Looking ahead, respondents who say their organisations have a stronger sense of purpose are much more optimistic about their future prospects and their ability to stay ahead of industry disruptions (83% vs 42%) and their long-term ability to outperform the competition (79% vs 47%). That said, despite the advantages, the research links to a strong sense of purpose, 20% of all respondents say that leadership fails to set an example for the rest of the organisation by truly living the organisation’s purpose. “Our survey findings highlight the connection between sustained business success and working with purpose to deliver positive impacts for stakeholders — including clients, employees, investors and community,” says Renjen. “The research also emphasises the need for leaders to not only articulate a culture of purpose but to visibly and consistently embody those behaviours. And that is a terrific blueprint for any organisation that wants to become and remain exceptional.”

women

LOOKING AT 2040

{BUSINESS}

A NEW STUDY SUGGESTS THAT IT WILL TAKE A QUARTER OF A CENTURY UNTIL ABOUT ONE-THIRD OF INCOMING CEOS IN THE WORLD’S LARGEST COMPANIES ARE WOMEN. The study found that in most other aspects, incoming men and women CEOs have similar profiles: CEOs of both genders rarely come from a region outside that of the company headquarters; they’re more likely to come from line, rather than staff, roles; they became CEO in their early 50s; and they have a tenure of about five years. Among other notable findings about women and the CEO slot: • The industry with the lowest share (0.8%) of women CEOs between 2004 and 2013 was the materials industry. • The countries with the highest share of women CEOs between 2004 and 2013 were the US and Canada (3.2%). The country with the lowest percentage (0.8%) was Japan.

ABOUT THE REPORT

T

he numbers are moving in the right direction: In eight out of the last 10 years, the share of women becoming CEOs of the world’s biggest public companies has been higher than the share of women leaving that office. And, over the past five years, the total share of women becoming CEOs was considerably higher than in the prior five-year period (3.6% versus 2.1%). But despite the upward trend, the numbers are low and wobbly: women made up just 3% of new big-company CEOs in 2013, a 1.3 percentage point drop from 2012. That’s according to Strategy&’s 14th Annual Chief Executive Study, which examines CEO turnover and incoming and outgoing CEOs in the world’s 2,500 largest public companies. The current study looks at women CEOs over the past 10 years as well as overall succession trends, with a focus on 2013’s incoming class of CEOs. The study authors acknowledge that women CEOs are still rare but they are becoming more prevalent, and that trend

WOMEN CEOS ARE STILL RARE BUT THEY ARE BECOMING MORE PREVALENT is expected to accelerate to the extent that, by 2040, women will likely make up about a third of new CEO appointments. The study has consistently found that Boards most often elevate “insiders” – i.e., people who are currently with the company. In fact, 78% of men who were CEOs between 2004 and 2013 were insiders (vs. 22% outsiders). But only 65% of women who were CEOs in the same period were insiders (vs. 35% outsiders). It’s also notable that women CEOs are more often forced out of their jobs – as opposed to leaving in a planned succession or via a merger – than men CEOs. Over the past 10 years, 38% of women CEOs who left their positions were forced out, versus 27% of men.

For 14 years, Strategy& has examined CEO turnover and the incoming class of CEOs at the world’s largest 2,500 public companies, because determining what happens at critical decision points can help us understand what companies are looking for in their CEO and how the role is changing. Along with overall succession trends, this year’s study looks at 2013’s incoming class of CEOs, and also focuses on women CEOs over the last 10 years. This study defines the world’s 2,500 largest public companies by their market capitalization as of January 1, 2013, according to Bloomberg. Each company that appeared to have changed its CEO was investigated for confirmation that a change occurred in 2013, and additional details were sought for both the outgoing and incoming CEOs.

ABOUT STRATEGY&

Strategy& is a global team of practical strategists with 100 years of strategy consulting experience behind it, combined with the unrivalled industry and functional capabilities of the PwC network. It is a member of the PwC network of firms in 157 countries with more than 184,000 people committed to delivering quality in assurance, tax, and advisory services. To view the full report summary: www.strategyand.pwc.com/chiefexecutivestudy.

THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

Gold 79

recruitment

SKILLS GAP HAMPERS Business Recruitment

{BUSINESS}

M

ore organisations are planning a hiring spree over the next 12 months as their growth prospects improve, but nearly two thirds (63%) are concerned that they won’t be able to find the people with the skills they require to fill these positions. A global PwC survey of over 1,300 CEOs in 68 countries reveals that after a number of years of headcount cuts, half of the organisations surveyed are looking to hire again. Organisations in the Middle East (71%), the South East Asian nations (54%) and China (53%) plan to make the most net hires over the next 12 months, while business services (51%), insurance (49%) and technology (46%) are the sectors looking to make the most net hires. Despite the positive outlook for jobs, however, PwC’s research reveals that business leaders are more concerned than ever about being able to find the right people to fill these roles. Some 63% of CEOs (an increase of 5% from 2013) say that the availability of key skills is the biggest business threat to their organisation’s growth. CEOs in Africa

(96%), the South East Asian nations (90%) and South Africa (87%) are most concerned about the lack of skills. Technology and engineering firms are struggling the most with the shortage of skilled employees. SERIOUS TALENT MANAGEMENT CHALLENGES LAY AHEAD

The growing skills gap and rising cost of labour in emerging markets is forcing organisations to look to new markets for talent. Many multinationals have already raided the pipeline of graduates and skilled young workers emerging from China and India, and there are signs that employees in these regions are beginning to favour domestic employers over their western rivals. Organisations are now widening their reach for new talent into Indonesia, Vietnam and the Philippines.

80 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

The research shows that business leaders are looking to the government to do more to help to plug the skills gap. Two in five CEOs say creating a skilled workforce should be one of government’s top three priorities and over half (52%) believe that regulation is hampering their ability to attract the best people. Only one in five feel that their government has been effective in improving workforce skills in their region. In contrast, an overwhelming majority of business leaders (93%) say they need to change their strategy for attracting and retaining talent, but three in five haven’t taken any steps to do this yet. At a local level, 60% of CEOs in Cyprus state that their headcount will remain the same during the next 12 months when the respective percentage during the previous survey was 31%. The percentage of CEOs who say that their headcount will decrease during the next 12 months has dropped to 23% from 50%. As regards to their priorities, 60% of CEOs in Cyprus place emphasis on creating a skilled workforce. PwC’s report The talent challenge: Adapting to growth is based on 1,344 interviews with CEOs in 68 countries between September and December 2013.

SME lNANCING

NO STONE LEFT

UNTURNED? FINANCING SMES IN CYPRUS

R

{BUSINESS}

By Chloe Panayides

esolutely describing small- to mediumsized enterprises (SMEs) as the backbone of the island’s economy, key members of the Association of Chartered Certified Accountants (ACCA) and RTD Talos congregated at the Hilton Park Hotel in Nicosia on June 4 to present the results of a study aptly titled Financing SMEs in Cyprus. During a visit to Cyprus in December 2013, ACCA CEO Helen Brand was alarmed by the sudden deterioration of the state of affairs and set about commissioning independent research into the subject of SME financing. Local consultancy company RTD Talos was awarded the tender to proceed with the research, with all those involved hoping that the challenges being faced by SMEs could be confronted concertedly and with commitment to change. Numerous institutions were engaged to provide their perspectives – from the Ministry of Finance and the Cyprus Chamber of Commerce and Industry to Bank of Cyprus, EY and Infocredit – with the results being described by Panayiotis Savvides, Chief Researcher at RTD Talos, as going far beyond the breadth of knowledge previously held true by relevant stakeholders. Presenting the results, he noted: “This study undoubtedly highlighted that we don’t know as much as we think we do: there are better solutions available for tackling this problem.” Lodged firmly in the proverbial ‘Catch 22’ situation, financial institutions and SMEs have become paralysed by uncertainty and mistrust: even though funds are technically there to be lent, both supply and demand for SME finance have been

severely dented. tax treatment. Four key recommendaDissipating despondency, Mark tions have thus emerged: Gold, the Past President of ACCA, Panayiotis Savvides, Chief Researcher described the report’s findings as Regulators should at RTD Talos impressive, and proof of what can be (re)build the finanachieved should an incredible pool of cial infrastructure for SME credit. expertise be united. Concluding, he asCyprus needs a fully-fledged credit bureau serted: “Despite its unique circumstances, capable of credit scoring, a national Development Bank with foreign partnerships Cyprus is not alone.” serving SMEs, a regulatory framework that will enable leasing, and a bankadministered mechanism for reconciling overdue payments.

1.

DESPITE ITS UNIQUE CIRCUMSTANCES, CYPRUS IS NOT ALONE

2.

The Government must accelerate the absorption of EU structural funds, considering that the island has access to €950 million of such funding. Moreover, the option of tapping into these funds over a period of three years instead of the traditional seven-year cycle should be explored.The banking sector needs to enhance its efforts to help SMEs in the short-term by better implementing the Central Bank of Cyprus’ Arrears Management Directive; increasing participation in European Investment Bank and European Investment Fund programmes; and resisting the temptation to pay down Emergency Liquidity Assistance quickly as investors perceive this as being a sign of systemic weakness.

3.

Regulators must support the growth of alternative finance options, providing tax incentives for individual investment into SMEs by high-net worth individuals, and supporting the development of invoice auctioning and bartering platforms through targeted investment, free access to credit data, and a favourable

BOOK REVIEW ESSENTIALISM: THE DISCIPLINED PURSUIT OF LESS BY GREG MCKEOWN (VIRGIN BOOKS, 2014)

R.R.P. £12.99 (£8.96 FROM AMAZON.CO.UK)

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ow can we do less but accomplish more? According to Greg McKeown, CEO of THIS Inc., a Leadership and Strategy agency in Silicon Valley, being an Essentialist is all about having a disciplined way of thinking. It means challenging the core assumption of “We can have it all” and “I have to do everything” and replacing it with what he calls the pursuit of “the right thing, in the right way, at the right time”. The book aims to show us how to achieve “the disciplined pursuit of less”. McKeown believes the answer lies in paring life down to its essentials and while he can’t say what’s essential to every life, he says [OH[ OL JHU OLSW `V\ ÄUK [OL TLHUPUN PU yours. Using the experience and insight of working with the leaders of the most innovative companies and organisations in the world, he shows the reader how to put Essentialism into practice in his/her own life. A timely, essential read for anyone who feels overcommitted, overloaded, or overworked – in other words, everyone!

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cyprus

{ECONOMY}

S

THREE

CYPRUS’ ECONOMIC PROGRAMME IS GIVEN A FOURTH GREEN LIGHT BY THE TROIKA BUT WORK STILL REMAINS TO BE DONE.

CHALLENGES

taff teams from the Troika of international lenders – the European Commission (EC), European Central Bank (ECB), and the International Monetary Fund (IMF) – visited Nicosia from May 6-17, 2014 for the fourth review of Cyprus’ economic programme, which is supported by financial assistance from the European Stability Mechanism (ESM) and the IMF. The programme seeks to ensure the recovery of economic activity to preserve the welfare of the population by restoring financial sector stability, strengthening public finance sustainability, and adopting structural reforms to support long-run growth. The Troika’s official statement at the

CONTINUED FULL AND TIMELY POLICY IMPLEMENTATION REMAINS ESSENTIAL end of the latest visit stated the following: Cyprus’s programme remains on track. Fiscal targets for the first quarter of 2014 were met with a considerable margin, reflecting better-than-projected revenue performance and prudent budget execution. Progress has been made with the recapitalisation and consolidation of the cooperative credit sector, and banks are advancing with their restructuring plans. This has allowed for a significant liberalisation of domestic payment restrictions, in line with the government’s roadmap. The authorities have also taken steps toward implementing their ambitious structural reform agenda. While the recession this year is expected to be somewhat less severe than anticipated, the outlook remains challenging. The contraction of output for 2014 has been revised down to 4.2% from 4.8%, given the better-thanexpected outturn for 2013 and other recent indicators pointing to gains in confidence. Unemployment remains very high, and

large non-performing loans are constraining the ability of banks to supply credit to the economy. As a result, the recovery is now expected to be more subdued than previously forecasted, with growth projected at 0.4% in 2015 and gradually improving thereafter, as domestic demand is weighed down by the ness. need to reduce very high levels of indebtedness. The first key challenge is to effectively reduce duce non-performing loans. This is essential to allow for a resumption of credit to the private ate sector to support growth and job creation. Reforming the legal re framework for foreclosure and insolvency is paramount nt in order to provide balanced incentives to borrowers and lenders to negotiate and reach agreement on ile restructuring of non-performing loans, while e, avoiding undue hardship. At the same time, the supervisory authorities need to intensifyy their monitoring of banks’ effective action to collect and restructure debt, in compliance ears with the existing Code of Conduct and arrears management framework. The authorities are on also strengthening supervision and regulation and the implementation of the Anti MoneyyLaundering framework. A second challenge is to maintain publicc ities finances on a sustainable path. The authorities are making progress in this area, having consistently exceeded the programme’s fiscal targets. Still, prudent budget execution should be maintained, given still high macroeconomic uncertainty and downside risks which may weigh on fiscal outcomes. Over the medium term, the authorities will need to steadily reduce the fiscal deficit and gradually achieve a primary fiscal surplus of 4% of GDP in order to put public debt on a sustained downward path. The third challenge is to strengthen institutions. The authorities are preparing to launch the reform of the welfare system, introducing a guaranteed minimum income scheme to protect vulnerable groups during the current downturn. They are also making progress with reforming the revenue administration to increase its effectiveness

82 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

and efficiency; they need d as well to strengthen collection powers to resolutely address i and d non-compliance. li Al tax evasion Along with efforts to improve public financial management, they will need to take steps to address the management of fiscal risks. Firm implementation of the government’s privatisation plan remains essential to increase economic efficiency, attract investment and reduce public debt. Continued full and timely policy implementation remains essential for the success of the programme, given still high risks. Conclusion of this review is subject to the approval process of both the EU and the IMF. The matter is expected to be considered by the Eurogroup, the ESM Board of Directors, and the Executive Board of the IMF by early July. Their approval would pave the way for the disbursement of €600 million by the ESM, and about €86 million by the IMF.

cyprus

EUROPEAN COMMISSION

Assesses the National Reform

{ECONOMY}

PROGRAMME FOR CYPRUS ON JUNE 2, THE EUROPEAN COMMISSION PUBLISHED A WORKING DOCUMENT OF ITS ASSESSMENT OF THE 2014 NATIONAL REFORM PROGRAMME FOR CYPRUS. THIS IS FROM THE EXECUTIVE SUMMARY OF THE 25-PAGE REPORT.

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he need for an adjustment of Key challenges in the period ahead relate to: private and public sector debt • BANKING SECTOR: signs of stabilisation are from the current high level emerging in the banking sector, although will continue to act as a drag significant challenges remain. These notably on growth. GDP is forecast relate to the need to clean up banks’ balance to further decline by -4.2% in 2014, and the sheets from the high level of non-performing economy is projected to return to modest loans and to reduce the private sector indebtgrowth of 0.4% next year, and only gradually edness in order to restore credit and sustainimproving thereafter, as domestic demand able growth. The establishment of an approis weighed down by the need to reduce very priate debt restructuring framework is key high levels of indebtedness. Nonetheless, risks to that effect. Work also needs to continue to the outlook remain on the downside. Risks on the implementation of the restructuring mainly stem from a slower than envisaged plans of the domestic banking institutions. resolution of nonperforming loans, a possible It is also important to ensure that further prolonged period of tight credit supply condi- relaxation of capital controls does not entions, a possible slower than envisaged housedanger financial stability. Work also needs hold deleveraging process, a further worsening to continue on the anti-money laundering of labour market conditions and further framework. increase in the geopolitical ten• PUBLIC FINANCES: building on sions in Russia and Ukraine. the strong fiscal performance Fiscal performance has to date, the authorities CYPRUS’ remained strong. Fiscal would need to continue PROGRAMME targets for 2013 have to maintain their pruREMAINS ON TRACK been met with considerdent budget execution. able margin, due to both As agreed at the onset of continued prudent budget the programme, an addiexecution and a less severe tional adjustment will be recession than anticipated. necessary in the outer years The 2013 government deficit to attain the long run objechas turned out around 2 percentage tive of a sustained 4 percent of points lower than targeted, while the 2014 GDP primary surplus, which is needed government deficit is projected to be about ½ to place public debt on a sustainable downa percentage point lower than earlier anticiward path. pated, at 5.3% of GDP. The key objectives of STRUCTURAL REFORMS: the implementathe economic adjustment programme are to tion of structural reforms has advanced, help Cyprus’s return to a sustainable growth although some reforms need to be accelerpath with better employment prospects and ated. Progress was notably observed in the to restore financial stability. Cyprus’ proareas of revenue administration, which aims gramme remains on track, a year after its to improve efficiency of collection, in public agreement on 24 April 2013. Progress has financial management, immovable property been achieved in all key objectives of the tax reform with the objective of improvprogramme, namely in the banking sector, ing the fairness of the tax burden, and in fiscal consolidation, and structural reforms, improving labour market activation policies. although challenges remain. Key priority is the adoption of the social

A YEAR AFTER ITS AGREEMENT

welfare reform to provide adequate social protection for vulnerable households during the current downturn. Also, the privatisation plan should be promptly put into implementation. The introduction of a national health system constitutes another important priority, the first phase of which is expected to be in place mid-2015.

BOOK REVIEW ECONOMICS: THE USER’S ’ GUIDE: A PELICAN INTRODUCTION BY HA-JOON CHANG (PELICAN, 2014)

R.R.P. £7.99 (£5.51 FROM AMAZON.CO.UK)

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he author of the bestselling 23 Things They Don’t Tell You About Capitalism is probably best described as H OL[LYVKV_ LJVUVTPZ[ ÄYTS` V\[ZPKL [OL mainstream where neoclassical economics is the reigning creed. With his cheerful style, wide learning and a clear and concise authorial voice, he is the ideal candidate for writing an introductory book on economPJZ ^OPJO OHWWLUZ [V IL [OL ÄYZ[ [P[SL PU [OL newly resurrected Pelican imprint. The book is divided into twelve chapters exploring a range of economic issues including “What is economics?” as well as the role of the state, inequality and poverty, work and unLTWSV`TLU[ ÄUHUJL HUK WYVK\J[PVU ( IYPLM history of capitalism gives the reader a good understanding of two and a half centuries of global progress. It’s a brilliant introduction to the subject while more seasoned students VM LJVUVTPJZ ZOV\SK ÄUK [OL ZJVWL VM [OL book (both intellectually and geographically) impressive. As Chang himself notes, a widespread knowledge of economics is essential to understanding our societies and democratizing our political life.

THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

Gold 83

taxation

TAX RISKS Accelerating Worldwide

{TAX&LEGAL}

EY SURVEY FINDS COMPANIES CONCERNED ABOUT THE POTENTIAL FOR BEPS “TAX CHAOS”

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TODAY’S GLOBAL BUSINESS ENVIRONMENT PRESENTS A COMPLEX ASSORTMENT OF TAXX RISKS FOR MULTINATIONALSS

ore than four out of five (81%) companies expect already heightened tax risks to accelerate in the next two years. This is according to Bridging the Divide, a new global report by leading professional services organisation EY, which also finds that companies view the potential lack of coordination by national governments over the Base Erosion and Profit Shifting (BEPS) project of the Organisation for Economic Cooperation & Development (OECD) as a major risk. The EY survey of 830 tax and finance executives (including 120 Chief Financial Officers) in 25 countries offers the first globally quantifiable sample of how companies around the world view the OECD’s BEPS project. Nearly one-third (31%) of all companies surveyed predict that the BEPS roll-out will be characterised by relatively limited coordinated action and by increased unilateral action by countries. Three-quarters (74%) of the largest companies surveyed (those with annual revenues in excess of US$5 billion) say that they believe some countries already see the very existence of the OECD’s BEPS project as a reason to change their enforcement approach before any recommendations have passed into national law. As a result, the majority of these largest companies (61%) fear that double taxa-

tion will increase in the next three years. “International companies share the OECD’s concern that coordinated action by national governments is necessary to ensure that any BEPS-related recommendations are productive.” says EY’s Global Tax Vice Chair, Dave Holtze. “The OECD can play an invaluable role in preventing what it has called “global tax chaos” that results in double taxation and increased controversy by pressing for common approaches and consistent standards.” As well as risks relating to BEPS, the survey reveals other sources of tax risks that companies say they are currently experiencing and anticipate facing in the years to come: • The majority of the largest companies (68%) report that they feel tax audits have become more aggressive in the last two years, up from 57% in 2011 when the survey was last conducted. • Companies are experiencing a harsher enforcement environment from the tax authorities, particularly around transfer pricing, which they identify as the top tax risk. Companies rank indirect tax and permanent establishment challenges as their second and third biggest sources of risk. • The news media has been an even bigger driver of tax-related reputation risk. 89% of the largest companies are concerned about news media coverage of taxes, up from 60% in 2011.

• 84% of the largest companies agree that entering or operating in an emerging market significantly increases levels of tax risk and controversy risk, up from 67% in 2011. • For all companies responding, China, India, and Brazil (in that order) are the top three emerging market countries identified as having the most significant potential for risk related to tax. • As a result of these increased risks, 78% of the largest companies agree or strongly agree that tax risk and controversy management will become more important in the next two years. Yet three-quarters of these companies feel they have insufficient resources to cover tax function activities, up from 57% in 2011. 43% of all companies use no technology or rely on local personnel to manage tax audits and incoming data requests from the tax authorities. Holtze continues: “Today’s global business environment presents a complex assortment of tax risks for multinationals, particularly when operating in markets that may be less familiar. Companies need to get actively engaged on this issue, from ensuring that they have open lines of communication within their own enterprises to making their views known and understood on issues such as BEPS.”

INCREASING IMPORTANCE OF TAX RISK AND CONTROVERSY

ASSESSING FOR BEPS

INCREASING DOUBLE TAXATION?

81%

Georges Bock, KPMG Luxembourg

of all companies surveyed agreed or strongly agreed that tax risk and controversy will become more important for their companies in the next two years.

60%

84 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

of the largest companies have evaluated what BEPS means for them but have made no changes to existing structures, and 29% haven’t evaluated current structures in any way in response to the BEPS plan.

WHEN ASKED TO WHAT EXTENT THEY FORESEE MORE DOUBLE TAXATION FOR THEIR COMPANY IN THE NEXT TWO YEARS,

61%

of the largest companies expressing an opinion either agreed or strongly agreed.

TAX NEWS

AMENDMENTS TO THE CAPITAL

{TAX&LEGAL}

GAINS TAX LAW

M he double tax agreement between Cyprus and Spain, which was signed on 14 February 2013, came into force on 28 May 2014. The Cyprus tax authorities have indicated that they will allow the benefits included in the new agreement to take effect from 1 January 2014. Prior to 2009, Cyprus-resident companies were ineligible for certain Spanish tax benefits and exemptions on account of Cyprus being included on the Spanish authorities’ so-called blacklist of tax havens, despite complying with all relevant information exchange requirements. In 2009 the Spanish authorities removed the restrictions and negotiations on a double taxation agreement resumed. The entry into force of the agreement normalises tax relations between the two countries and has already led to a significant expansion of economic ties and reciprocal investment between them.

ost capital gains are exempt from tax in Cyprus, and the only gains that are subject to tax are those relating to real estate located in Cyprus. The Capital Gains Tax Law (“CGT Law”) provides for capital gains tax at the rate of 20% to be charged on gains arising from the disposal of real estate in Cyprus, including gains from the disposal of shares in unlisted companies owning real estate in Cyprus to the extent that the gain derives from the company’s real estate assets. Laws 119(I) of 2013 and Law 120(I) of 2013 have made detailed amendments to the CGT Law. Law 119(I) extends the definition of gains subject to capital gains tax to include gains accruing on disposal of rights derived from a contract for sale of immovable property in Cyprus, including the assignment of rights derived from such a contract. This amendment addresses the situation where an initial purchaser of property disposes of his interest in the property by assigning his contract to buy the property to a new purchaser before the title has formally been transferred. For example, A enters into an agreement to buy a property from B at a price of €100,000. He pays the purchase price and the contract is deposited with the Department of Lands and Surveys but the property is not transferred because title deeds are not available. A year later, the property has appreciated in value and A agrees to assign the contract to a new purchaser, C, for €150,000 (meaning that C takes over A’s rights under the original contract). The new amendment makes clear that A’s gain of €50,000 is subject to capital gains tax. Gains are generally calculated by reference to the value of the property on 1 January 1980. Law 120(I) of 2013 amends the CGT Law to provide that the value is to be determined in accordance not only with the general valuation of property at that date carried out under the Immovable Property (Tenure, Registration and Valuation) Law but also with other relevant provisions of that law. Provision is also made for the Director of the Lands and Surveys Department to

determine property values in certain cases, including where the property disposed of was created following a division into building plots to which no property title has been issued. Furthermore, provision is made to deal with cases where property is sold at public auction by or on behalf of the Lands and Surveys Department.

BOOK REVIEW PAATENT LAW IN PATENT N GLOBAL PERSPECTIVE

BY RUTH L. OKEDIJI & MARGO A. BADLEY (EDITORS) (OUP USA, 2014) R.R.P. £90.60 (£88.80 FROM AMAZON.CO.UK)

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he editors, both of whom are widely recognized as foremost experts on the international intellectual property system, have compiled [OPZ [OL ÄYZ[ JVSSLJ[PVU [V L_WSVYL WH[LU[ law issues through the lens of economic development theory, international relations, theoretical foundations for the patent law system in the global context, and more. The book addresses critical and timely questions in patent law from a truly global perspective, with contributions from leading patent law scholars from various countries. Topics include the role of patent law in economic KL]LSVWTLU[" [OL LMÄJHJ` VM WH[LU[ YPNO[Z PU facilitating innovation; patents and access to medicines; comparative patentability standards (including subject matter eligibility for biotechnology and software inventions); limitations and exceptions to patent scope and protection (including exhaustion, compulsory licensing, and research exceptions); and the impact of emerging economies on global patent system governance. The contributors provide a wealth of original insight and thought-provoking discussion that will be valuable not only for academics doing research on patents, but also to policymakers considering the wisdom of different policy approaches.

THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

Gold 85

{LIFESTYLE}

AS MOTORCYCLE ENTHUSIASTS MATURE PAST THE MERE NEED FOR SPEED, A FRESH MARKET IS REVVING UP, IN WHICH THESE TWO-WHEELED VEHICLES ARE GAINING IN VALUE BEYOND THE THRILL OF THE RIDE. IN FACT, INVESTING IN MOTORCYCLES IS BECOMING A WHOLE OTHER KIND OF ADRENALINE-FUELLED ADVENTURE UNTO ITSELF.

TWO WH EEL

By Chloe Panayides

D OO SG

Investing in motorcycles

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aring, dynamism, and a dance with danger, riding motorcycles has become synonymous with power and prowess, shaping the identity of many a young person in the throes of rebellion. Others have merely undergone an awakening to the sheer aesthetic appeal embodied in these two-wheeled vehicles that seamlessly marry form and function. “To be a great motorbike racer, the most important thing is passion for the bike.” Wise words from none other than Valentino Rossi, one of the most successful professional motorcycle racers of all time and multiple Motorcycle Grand Prix World champion. And, unsurprisingly, professional dealers’ opinions have converged in tandem: passion for the bike must also be, unequivocally, present, if one wants to become a great motorcycle investor.

In stark contrast to the classic car market, motorcycle prices have yet to ripen to the extent that you would be inherently excluded from the market should your pockets not stretch indulgently deep. Speaking to The Telegraph, London Ferrari dealer Joe Macari explained: “From around £45,000, you can own a GP bike for the road that’s comparable to a Ferrari road-legal race car.” Not bad; in fact, to the motorcycle enthusiast, it sounds terribly tempting. Still, industry insiders caution accordingly: don’t let sensibility affect sense. Whilst beauty may be in the eye of the beholder, value is inextricably integrated within a vehicle’s history; that is, its rarity, popularity, provenance, and originality. The rules of supply and demand dictate that the latter must far outweigh the former. Whether due to age, model or design, a motorcycle whose numbers are few will inevitably command a higher asking price. Experts advise that motorcycles may be demarcated into ‘old classics’ (pre-World War II) and ‘emerging classics’ (postWorld War II). Currently, old classics endure as being the most popular. One need only look at the auction market and the history of private sales to notice that pre-WWII limitedrun bikes fetching the most appealing prices. A 1924 Indian Chief – considered a classic American motorcycle brand – can, depending on condition,

The Cyprus Classic Motorcycle Museum

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purred by a personal love of motorcycles, Andreas Nicolaou founded the Cyprus Classic Motorcycle Museum in Nicosia, opening up a space at which ardent admirers may come and avail of his 20+ years of collecting. Comprised of some 150 motorcycles, the Museum’s collection contains models dating from 1914 to 1983, including AJS, MV, Aqusta, Matchless,

Norton, BSA, Triumph, Ariel, BMW, James, Moto, Guzzi, and 9V`HS ,UÄLSK Amongst the special exhibits of the Museum are three Cyprus Police motorcycles, which had been used by the Presidential Guard of Archbishop Makarios, and the motorcycle of EOKA (National Organisation of Cypriot Fighters) member Stylianos Lenas, which was used for carrying weaponry and ammunition, amongst others.

PASSION FOR THE BIKE MUST BE, UNEQUIVOCALLY, PRESENT, IF ONE WANTS TO BECOME A GREAT MOTORCYCLE INVESTOR. run up to $45,000 at auction, says vintage bike broker Somer Hooker. More impressive still, a 1923 Ace Four sold for $120,000 at a recent Pebble Beach Motorcycle Auction, and a 1915 Indian 8 Valve for $137,000. Meanwhile, Bonhams’ annual Quail Lodge auction of the most exclusive motorcars always reaps envy-inducing numbers. In 2012, motorcycle enthusiasts flocked to the Quail Lodge auction when rumour spread that it would be presenting three documented Crocker bikes. Crocker is hailed as being one of the definitive American motorcycle brands. Very much a Hollywood “hot rod” bike, Crocker was created in and shaped by the culture of pre-WWII Los Angeles, by former Indian distributor Al Crocker. When it debuted in 1936, the upstart founder brazenly challenged world dominators Harley-Davidson, boasting superior technology, performance, handling and raw power. In fact, Al Crocker famously advertised that if any of his bikes were ever beaten by a stock Harley, he would refund

Visitors to the Museum are given the opportunity to acquaint themselves with the technological aspects of motorcycles, as well Cyprus’ history with this vehicular marvel.. ;OLYL PZ HSZV H ÄST YVVT H[ [OL L museum, as well as a rich col-lection of photographs, and a p, gift shop. An accessories shop, furthermore, is on hand, at rts which a big range of spare parts of old models of motorcycles is available.

THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

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Investing in motorcycles

A 1923 Ace Four sold for $120,000 at a recent Pebble Beach Motorcycle Auction

CAN’T BUY A THRILL?

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ith their rasping revs, lightningquick acceleration, and simply beautiful bodywork, these 10 motorcycles are some of the most expensive to have ever made their way onto the market.

1.

4.

YAMAHA ROAD-STAR BMS (GOLD-PLATED CUSTOM CHOPPER) – $500,000 Embellished with gold, and a red velvet seat, the Yamaha Road-Star is indulgence incarnate. Custom-built and rare, it is no wonder the price tag has penetrated the half a million mark.

JACK ARMSTRONG’S COSMIC STARSHIP HARLEY DAVIDSON – $1 MILLION Unveiled in 2010, the Cosmic Starship Harley Davidson features the well-known LEGENDARY BRITISH VINTAGE painting style of artist Jack BLACK – $400,000 Armstrong called ‘Cosmic Unique and antique, many view the Extensionalism’: a combi- grace of this legendary British Vintage Black nation of extreme colours as being unsurpassable. Armed with two and textures. Unique and cylindrical engines, capable of producing unusually, bike lovers are ready and willing to 250cc power, it is part with $1 million to bring this vehicle into revered as being a their possession. special addition to any ULTRA RARE PORCUPINE – motorcycle$750,000 adorer’s Lovers of antiquity cannot help but collection. become enamoured by this ultra rare Porcupine. Manufactured ECOSSE FE TI XX-TITANIUM in 1954, only 4 units remain SERIES – $300,000 in existence. Its unique Glamorous name comes from the and powerful, this WYVTPULU[ ZWPRLK ÄUZ bike was created by on the sloping cylinluxury manufacturders. ers the Ecosse Moto Works, and is aided, DODGE TOMAHAWK V10 SUPER- no less, by a 2.4-litre BIKE – $555,000 billet aluminum engine, In a twist of motorcycle fate, third on giving it an impressive the list of the most expensive actually has 225 of break horsepower. Only 13 were ever four wheels (two at the front and two at the produced. back, lying adjacent to each other), which work independently of one MACCHIA NERA CONCEPT BIKE – another. Manufactured by $201,000 Dodge, it is claimed that ‘Simply beautiful and beautifully simple’: its top speed reaches the Macchia Nera Concept Bike’s dean unbelievable 675 signers are said to have km/h (yet to be remained faithful to this proven in pracmaxim when bringing it to tice). life. Light metals,

5.

2.

6.

3.

7.

such as aluminum), have given the bike a light ^LPNO[ HUK [OL +\JH[P 9: LUNPUL ÄLYJL power. As it is no longer in production, numbers in existence have dwindled driving prices resolutely up.

8.

ICON SHEENE – $160,000 Barry Sheene MBE, a beloved British World Champion Grand Prix motorcycle road racer, inspired the creation of the Icon Sheene. Sadly, Sheene died in 2003 at the age of 52, and so 52 bikes will be made in his honour. Each bike is not only handbuilt, but tailored according to the preferences of each customer, and comes complete with a Suzuki 1400cc engine, a Garrett turbocharger, and is hand-painted – by the same artist who used to paint Sheene’s helmets – with a unique playing card.

9.

MTT TURBINE STREET-FIGHTER – $175,000 Even though MTT had already succeeding in creating what was credited as being the “most powerful production bike in the world”, the company was not ready to rest on its laurels: and so the Turbine Street-Fighter was born. Powered by a 320 horsepower Rolls Royce-Alison turbine with a 420 hp, 2,000 rpm torque, this bike hits an extraordinary top speed of 400km/h.

10.

HUBLESS HARLEY DAVIDSON – $155,000 Combining a classic engine with a cutting-edge innovation, the Hubless Harley Davidson has a 1969 Harley Davidson – Pan Shovel 80ci engine, and hubless (centreless) wheels, this sleek bike weighs approximately 315kg, and reaches a top speed of 160km/h.

the owner’s money. No refunds were ever requested. Malcolm Barber, CEO of Bonhams Group, explained of the sale: “Very seldom does a Crocker ever come up for sale, so having three documented Crockers in one sale is momentous” And how much did these Crockers genA 1924 Indian Chief – considered a classic American motorcycle brand – can command $45,000 at auction

88 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

erate? One of the 1937 V-Twin Engines sold for $291,000, the other for $302,000, with the 1940 ‘Big Tank’ V-Twin Engine managing to match the latter. Whether old or new, classic status is borne, according to Jerry Wood – an auctioneer based in Massachusetts – courtesy of the ’25 year rule’: people searching for

The 1940 Crocker ‘Big Tank’ V-Twin Engine sold for $302,000 at auction

their fountain of youth and discovering it in the machines they once rode in times of carefree revelry. Hooker agrees: “People like to go back to what was popular when they were young,” which, both experts concur, explains the popularity of models such as the 1979 Honda CBX, or the 1973 Kawasaki. Moreover, the popularity imported by a motorcycle’s association with a famous figure should not be underestimated. Provenance may constitute the difference between vehicular vice and virtue. Hooker himself knows this all too well. In the mid-1980s, he had the good fortune to come across a British Vincent Black Shadow for a mere $7,000. This was the very same motorcycle written about with feverish wonder and awe by American author and journalist Hunter S. Thompson in his novel, Fear & Loathing in Las Vegas. Thompson wrote: “If you ride the Black Shadow at top speed for any length of time, you would almost certainly die.” Besides being a phenomenal force in America’s rising counterculture of the 1970s, Thompson actually spent a year riding and living with the famed Hells Angels motorcycle club, experiencing their lives and hearing their stories first hand. Any motorcycle viewed with respect for its untamable power by Thompson would surely gain in value. And, living up to expectations, the Black Shadow did. Hooker sold his $7,000 purchase a mere year later for almost quadruple, at $27,000. Imagine, furthermore, what would transpire when self-professed motorcycle enthusiast Steve McQueen’s 1970 Husqvarna 400 Cross Frame became available for sale courtesy of his estate. The ‘King of Cool’ is perhaps the most notorious Hollywood rider of bikes and, though once faithful to the Triumph brand, McQueen’s discovery of the lightweight, powerful and

1915 Indian 8 Valve motorcycles are incredibly rare. One recently sold for $137,000

INDUSTRY INSIDERS CAUTION ACCORDINGLY: DON’T LET SENSIBILITY AFFECT SENSE. nimble Swedish-made Husqvarna – introduced to America in 1970 – resulted in a long-lived love affair. Complete with an exhaustive quantity of documents supporting its provenance and authenticity, the Husqvarna ridden by McQueen came up for sale at Bonhams in 2011. It commanded $145,000. More recently, in April 2014, the 1983 Suzuki XR41 bike, ridden by retired racer, Rob McElnea to victory in the Isle of Man TT race of the same year, came up for sale at H&H Auctions. Despite having been more or less entirely retrofitted – from machine to livery – it still sold for £30,240. Markedly less than what the ex-McQueen machine sold for, this sale highlights the importance of originality. Paul Fraser, of Paul Fraser Collectibles advises: “If you were to compare two Norton Commandos of the same year, you should expect to pay a 35-45% premium for an original bike over one that’s been restored, even though the restored one is probably shinier, newer looking, and perhaps more attractive.” A seemingly innocuous alteration, such as the addition of new tyres, can actually result in a motorcycle’s value decreasing by some several thousand dollars. “Many collectors preserve a bike’s authenticity by saving and storing the original tyres, offering the buyer the option of riding with confidence on new rubber, or displaying the bike the way it rolled off the showroom floor with the old set,” Fraser explains. Checking for mechanical integrity is likewise invaluable. Fraser states: “Looking inside a gas tank for rust, perusing frames for aftermarket parts, and checking engine compression ratios by pumping the kickstarter, are all ways to ensure mechanical integrity.” He adds: “The classic bike community is relatively small, so buying from someone with a good reputation is a good

way to insure nsure against the unknown.” Luckily ffor motor enthusiasts, gatherh i h ing opinions of experts in the field is as simple as attending shows, rallies, and meets, all enjoyable exploits for passionate ‘petrol heads’. In cases when uncertainty endures, hiring a consultant to share his or her insights, fully aligning oneself with a professional is also an option. So, strap on your helmet, get comfortable in your seat, and gaze out at the motorcycle investment highway ahead. Looking for adventure? Well then, get your motor running.

BOOK REVIEW THE LUMINARIES

BY ELEANOR CATTON (GRANTA, 2014) R.R.P. £9.99 (£3.85 FROM AMAZON.CO.UK)

T

he 2013 Man Booker prize-winner is an impressive, captivating novel with a plot as complex and a cast as motley as any big 19th-century novel. There’s an immacuSH[L ÄUPZO [V *H[[VU»Z WYVZL ^OPJO PZ UV mean feat in a novel that lives or dies by its handling of period dialogue. We may certainly be drawn, at least at the start of the book, into reading this as merely an enjoyable pastiche which takes its inspirations from a range of Victorian novels, complete with fallen women, mysterious villains, threats of madness and conjurers’ tricks. But is it possible to write a `Victorian’ novel in the 21st century? Well, John Fowles did it in the 20th (The French Lieutenant’s Woman) and there is something about the repetitive nature of the WSV[ [OL KLÄUP[PVU VM JOHYHJ[LY [OYV\NO astrology, the play of theatricality and ZLSM JVUZJPV\Z HY[PÄJPHSP[` HUK PU WHY[PJ\lar, the shift from story to meta-narrative that seem to point to something both more playful and tricksy at work here. Catton has written the consummate literary page-turner.

THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

Gold 89

A Day in the Life

Thomas Kazakos The Director-General of the Cyprus Shipping Chamber on why he is still there after 22 years, how the Cyprus shipping industry has made him a IDPLOLDU ÀJXUH DW KRPH DQG DEURDG DQG what he does in his limited free time. “I get up every morning at 5.45 and I have just a bowl

of cereal for breakfast before leaving Nicosia for my office in Limassol. The daily commute may sound like a bad idea but I do a lot of lobbying on behalf of the shipping industry and 99.9% of the people and organisations I deal with are in Nicosia. So I actually work in both cities but if I don’t have morning meetings in Nicosia, I am at the office by 8am. No two days are ever the same, though after an early meeting I always have to deal with what I call the “hydra” of e-mails I receive! In the afternoons there are committee meetings and I also have quite a lot of external meetings to attend since I am on the Board of the Cyprus Employers & Industrialists Federation, the Cyprus Chamber of Commerce & Industry and the Cyprus Investment Promotion Agency. The CSC is the only Association that is represented on all three but keeping up with all my obligations takes a lot of time. From the age of twelve I wanted to be a lawyer and I have two law degrees from the UK. I have never regretted studying law, which gave me a way of thinking that I use in my work to this day. My first job was with

the Employers & Industrialists Federation where I worked for six months on labour law issues. When I saw a vacancy notice for an in-house legal adviser at the Cyprus Shipping Council, as it was then called, I didn’t even know what it was but I applied and got the job. That was in 1992 and I am still there 22 years later! I feel very attached to the Chamber. I was its first full-time employee and I feel blessed to have been given the top job at the age of 27. The best thing about my job is something that few people in Cyprus will ever have the opportunity to enjoy. I have spoken with Kings and Prime Ministers as well as the proverbial man in the street. I have colleagues all over the world and I’ve been in places like Japan and Norway and had people call out my name. After so many years I have become something like a Cyprus shipping trademark at home and abroad! Shipping is an exciting 24-hour industry and the only drawback is the fact that I can’t devote as much time as I would like to my family. I try to be home by 7.30pm

Holiday reading Ho

90 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

The star of my favourite recent series (House of Cards UK)

but I always take work with me for what I call it my “third shift”. Fortunately my wife and I have a very healthy social life with good friends, including some who have remained close since school. At home I love watching films, especially political thrillers, and I’ve been trying to get into some good TV series recently. One I particularly enjoyed is House of Cards, the American remake of the English series that I also loved many years ago. I tend to read only work-related things unless I’m on

The star of my favourite old series (House of Cards US)

holiday when I devour novels. I once read 2-3 of Dan Brown’s books in the same number of days. The last one I read was his Inferno. In the car I listen to quality Greek music, country music and most things apart from heavy metal. When I need to concentrate and write something important, I lock myself in my office and put some music on. It helps me focus. Life has taught me that things like money and glamour are not what matters. I could never have imagined that working for the shipping industry could lead to emotionally moving and fulfilling experiences but the first time I raised funds from our members for the Make a Wish Foundation was for a 12-year-old boy who was not expected to live for more than a few weeks. His wish was for a full-size snooker table and when he was told that it was going to come true he improved so much that he was discharged from hospital within a week. Two or three years later I was organising a shipping event in Limassol and a young man in a wheelchair spoke to me: “Do you remember me? I’m the kid with the snooker table”… Our members do a lot of things like this that don’t receive publicity and I am very happy to try and give something to those who need our assistance. While I feel that I could happily live and work anywhere, I love Cyprus and the older I get, the more I enjoy it. Small is beautiful.”

A more direct approach to optimal cash management If the pinnacle is optimum efficiency, we recommend taking the direct route. Equipped with a range of leading integrated cash management solutions fitted to your unique specifications, we can facilitate the control of money throughout your organisation. To keep on top, simply call +44 (0)207 574 3246 or speak to your Relationship Manager. Wealth and Investment Management Cash Management Barclays offers banking wealth and investment management products and services to its clients through Barclays Bank PLC and its subsidiary companies. Barclays Bank PLC is registered in England and authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered No. 1026167. Registered Office: 1 Churchill Place, London E14 5HP. Barclays Bank PLC is regulated by the Central Bank of Cyprus in the conduct of its banking and investment business in Cyprus. Barclays Bank PLC is authorised by the Gibraltar Financial Services Commission to conduct banking and investment business in Gibraltar.

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