Hedge Fund Domicile:

1. Hedge Fund Domicile: Malta Dr Maria Chetcuti Cauchi– Partner Dr Priscilla Mifsud Parker– Partner

2. Overview • About the Firm • Malta Jurisdiction Overview • Malta Tax System • Residence & Domicile • Corporate Tax & Effective Tax • Participation Exemption Regime • Limited Capital Gains Taxation • Other features • Summary of Income Flows • Tax Planning Ideas

3. About the Firm Malta Jurisdiction Overview Professional Investor Funds Taxation About the Firm

4. About the Firm Truly multi-disciplinary • Accountants • Tax Advisors • Lawyers • Auditors • Mgt Consultants • IT Advisors Offices • Valletta • Nicosia - Larnaca • London • Kiev - Odessa

5. About the Firm Malta Jurisdiction Overview Professional Investor Funds Taxation Malta Jurisdiction Overview

6. Malta Jurisdiction Overview: Euro-Med Island Multi-Cultural History • Crossroads of Europe, N. Africa & Middle East • Phoenicians > Arabs > Romans > Portuguese > Spanish • Knights of St John > French > English • Independence 1964 • Population: c. 400,000 Cultural Influences • British, Italian • Commonwealth Member Languages • Maltese || English • Italian • French, German, Spanish

7. Malta Jurisdiction Overview: Reputable Onshore • Offshore laws revoked in 1994 • EU compliant • OECD + FATF compliant • Not on Blacklists UK Heritage • Tax: Income Tax Act, 1948 • Legal: Companies Act, Trust & Trustees Act European • EU Member since 2004, Eurozone since 2008 • Access to EU Funding • Access to EU Tax Directives: P-S, Mergers, I&R

8. Malta Jurisdiction Overview: Business Friendly

9. Malta Jurisdiction Overview: Statistics, Rankings • Financial Market Development – ranked 11 of 139 countries (World Economic Forum’s ‘Global Competitiveness Report 2010-11) • Strength of Auditing & Reporting Standards – ranked 8th (up from 12th the previous year) • Soundness of Banks - ranked10th (up from 13th) • Regulation of Securities Exchanges – ranked 12 (up from 13) • Competitiveness - 50th in the overall ‘global rankings’ • Foreign Direct Investment: • €11.9bn (end of June 2010) (double previous year) • Significant equity capital injections into foreign companies, • 83% of that increase was in Financial Intermediation. • Gross Domestic Product: Financial Services = 12% of GDP.

10. Malta Jurisdiction Overview: The Maltese Funds Industry

11. Malta Jurisdiction Overview: Regulator’s Approach • Open-Door policy • Flexible & speedy response “The approach has been to meet companies and discuss the application of regulations with them, both at the pre- and post-licensing phase ... most importantly, the MFSA uses two guiding principles, particularly at the licensing phase – they are that the regulatory process must be exhaustive, and no licence is granted without proper due diligence. Malta’s system follows the EU. After all, we are members of the EU, and we have not created our own system. We apply all the necessary regulations as required. With all the new regulations coming after the 2008 financial crisis, companies appreciate having regular meetings with the regulator. The ‘firm but flexible’ approach should not be taken to mean that we are dispensing with any regulation; the flexibility is about how we discuss a project and see how it can be modified to fit in with the regulations.” Prof Joseph Bannister – MFSA Chairman

12. About the Firm Malta Jurisdiction Overview Professional Investor Funds Taxation Professional Investor Funds

13. Professional Investor Funds Regulation Licensing The Players Case Studies Main Features 1 Regulation

14. Salient Criteria Maltese hedge fund product • Similar in concept to the Irish QIF and the Luxembourg SIF; • Only accessible to investors who can meet certain minimum investment requirements; • In essence, a Collective Investment Scheme. Regulation • the Act (ISA); • the relevant Regulations, and • the Investment Services Rules Investment Services Act 1994 (ISA) the regulatory framework for: • Investment services providers; • Collective investment schemes (“CIS”), including PIFs.

15. The three kinds of PIFs • Three levels of PIF targeting different investors. • Lighter regulatory burdens are imposed on PIFs targeting more sophisticated investors • No strict need for a full prospectus to be issued but an Offering Memorandum is required.

16. Experienced Investors

17. Qualifying Investors

18. Extraordinary Investors

19. Comparison table

20. Legal Form • SICAV (investment company with variable share capital) – most common • Other possible legal forms include: • INVCO – investment company with fixed shared capital • Unit trust • Partnership • Contractual • Sub-fund structures with separate patrimonies per sub-fund are permitted

21. Shareholding Structure • Depends upon the promoters’ specific objectives and preferences • Typical set-ups would involve the creation of • “Voting Shares” issued to the fund’s promoters (with the effective control over the structuring and general operation of the fund) • “non Voting Shares” issued to investors in the fund. • Any changes to the rights attaching to the Voting Shares, redemption of such shares, and/or issue of additional Voting Shares will require the prior approval of the MFSA in each case

22. Investment Objectives • All CISs - based on the principle of risk-spreading • PIF is to be shown to have some spreading or diversification of investments in its portfolio • Fund also should holds near-cash investments for the dual purposes and benefit of • diversifying the PIF’s portfolio and • addressing the liquidity concerns that may arise as and when investors take the opportunity to cash in their holdings at any time when they are permitted to do so in accordance with the Offering Document.

23. Professional Investor Funds Regulation Licensing The Players Case Studies Main Features 2 Licensing

24. The Licensing Process

25. Official Costs • MFSA Application fee: EUR 2,500 • MFSA License fee: EUR 2,000 • License maintenance fee: EUR 2,000

26. Stage 1 • Draft documentation • offering memorandum, • constitutional document, • service provider agreements • Meetings • Face to face meetings with regulator • introduce the project • initial concerns are flagged and can be discussed. • Documentation is submitted for regulatory review.

27. Stage 2 • Regulatory review commences • Written feedback is communicated by the regulator. • Amendments may be suggested or requests for clarification made. • Requests are generally not prescriptive and can be discussed and negotiated. • ‘In Principle’ approval issued.

28. Stage 3 • In principle conditions to be satisfied - formalities such as • forming the corporate vehicle & • submitting final documentation • Final license is issued & license fee is paid • Possibly post-licensing pre-commencement of business conditions • License is issued

29. Fit & Proper Test • Fit and Proper Test for • Directors, • Officers, • Trustee(s) in case of a unit trust • General Partner(s) in case of common contractual fund or limited partnership • MFSA’s assessment will centre around: • the protection of investors and the general public; • the protection to the reputation of Malta taking into account Malta’s international commitments; • the promotion of competition and choice; and • the reputation and suitability of the applicant and all other parties connected with the Scheme.

30. Fit & Proper Test • Three criteria that must be met • integrity; • competence; and • solvency. • Integrity - PIF, its officers and its Service Providers acting honestly and in a trustworthy fashion • Competence - persons responsible for running the PIF must be able to demonstrate an acceptable amount of knowledge, professional expertise and experience. Degree of competence required will depend upon the job being performed. The MFSA will take into account the qualifications, experience and skills of those involved. • Solvency - ensuring that proper financial controls and management of liquidity and capital is applied.

31. Listing • PIF can be submitted for listing on a recognised exchange • application for admissibility to listing can been submitted concurrently with an application for a PIF • documents submitted for PIF licensing need not be resubmitted as part of the application for listing • if MFSA is informed of the PIF’s intention to apply for admissibility to listing, approved documents for licensing of PIF will be deemed to be approved in relation to both the application for PIF as well as admissibility to listing.

32. Professional Investor Funds Regulation Licensing The Players Case Studies Main Features 3 The Players

33. Service Providers/Functionaries

34. DIRECTORS

35. Fund Manager

36. Administrator

37. Custodian

38. INVESTMENT ADVISOR

39. Professional Investor Funds Regulation Licensing The Players Case Studies Main Features 4 Case Studies

40. Case study 1: Listed equity fund

41. Case Study 1: Listed equity fund

42. Case Study 1: Listed equity fund • Fund is structured as an open ended SICAV with three sub-funds • Legal structure permits redemptions with the fund, thus providing liquidity for investors • Different sub-funds have different fee arrangements, thus increasing attractiveness to different types of investors. • Sub-funds have separate patrimony (assets & liabilities). Same structure can be used with sub-funds pursuing different investment strategies. • Fund is self-managed & self-administered: reduces cost base for smaller funds

43. Case Study 2: Life settlements funds

44. Case Study 2: Life settlements fund

45. Case Study 2: Life settlements fund • Fund structured as unit trust with full suite of service providers • Unit trust structure provides tax transparency, which can be used to mitigate effect of withholding taxes • Investors settle funds with the trustee who invests them in accordance with instructions of the fund manager • Size of fund permits employment of full suite of service providers – administrator for NAV calculation, custodian for asset safe-keeping (could be done by trustee), servicing agents to maintain policies • Assets are highly illiquid so fund is close-ended

46. Professional Investor Funds Regulation Licensing The Players Case Studies Main features 5 Main Features

47. Use • Professional Investor Funds • be used a fully-fledged Hedge Fund for a variety of assets such as securities, bonds, derivatives, money instruments, debt instruments, other funds, tangible movables and immovable property. • ideal for umbrella or multi-class funds • utilisation and protection afforded by segregated cell companies enjoying distinct legal personality.

48. Flexibility • Funds targeting Qualifying and Extraordinary investors have no restrictions on their investment strategy. • Service providers located in other jurisdictions can be engaged. • MFSA willing to accommodate specific requirements and innovative arrangements

49. Self-management • Malta PIFs can be self-managed and self-administered • Need to demonstrate sufficient competence and resources • No need to engage third party fund manager, administrator, custodian (expect for PIFs targeting Experienced Investors)

50. Cost effective • Cost effective jurisdiction, ideal for funds with a NAV of less than EUR 100m • Fund administrator can be engaged for half the cost of other EU fund domiciles • Competitive professional fees • Competitively priced human resources • Low statutory fees