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Undertaking for Collective Investment in Transferable Securities - (UCITS)

An open-ended undertaking for collective investment in transferable securities (UCITS) is undertaking the objective of which the collective investment is in transferable securities and/or in other liquid financial assets of capital raised from the public.

Taking that into consideration, the actions taken by a UCITS, to ensure that the stock exchange value of its units does not vary significantly from their net asset value, shall be regarded as equivalent to such re-purchase or redemption.

Under the law that governs the set-up and operation of open-ended undertakings there are two legal forms that can be distinguished:

a) Mutual Fund

The mutual fund is a group of property, whose assets are jointly owned by unit holders. The assets of the fund are deposited with a custodian. Jointly they are considered to be collective portfolio, managed by a Management Company for the interests of the unit-holders.

The mutual fund must have initial share capital fully paid, amounting to 200 thousand Euros (€ 200,000)

b) Variable capital investment company

The Variable Capital Investment Company has the legal form of a limited company with shares and HAS the following additional conditions:

(a) It is only intended to collectively manage its own portfolio, investing in securities and other financial instruments within the meaning of article 40, for the benefit of the shareholders.

(b) To collect funds which are invested for the purposes of paragraph (a) of the public;

(c) To function on the principle of risk-spreading

(d) The shares are repurchased or redeemed, directly or indirectly, with its assets, at the request of the shareholders, while the capital is increased and decreased with the issuance of new shares or redemption or repayment of old shares, without following the procedure for increase or reduction of capital as laid down in the companies Law.

For UCITS to start operating a licence from the Securities and Exchange Commission must be obtained. This authorisation licence provides the benefits for operating in all Member State of the European Union.

(1) CySEC authorises a mutual fund only if the Securities and Exchange Commission approves the Management Company responsible to manage the fund and also the custodian of the fund.

(2) CySEC grants licence for a Variable Capital Investment Company, only if it previously approves the Investment Company's memorandum and articles of association.

(3) Note that it is possible to form funds in Cyprus and manage them from an approved institution outside Cyprus (in another EU country). Additionally, existing cross border marketing provisions are now simplified to a regulator notification which permits a UCITS to be marketed in another member state within 10 days after the receipt of the notification letter, with key investor information, in order to be able to assess the risks associated with the specific UCITS.

A Custodian can be a credit institution with a registered office in the Republic of Cyprus or with a head office in another Member State of the European Union and a branch within the territory of the Republic of Cyprus, always provided that it is entitled to provide in accordance with the relevant licence custodian services and has the necessary infrastructure to support such services.

The management company must have an initial capital of at least one hundred and twenty five thousand euro (€ 125,000), which must be fully paid.

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