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May 2008

Experts on Investing Through Cyprus

“Investing Through Cyprus – A panel presentation on investing in Bulgaria Via Cyprus,” was hoster recently by the Cyprus Trade Office in New York. The event was organized in co-operation with the Bulgarian Trade and economic Relations Office, companies Bingham & McCutchen LLP, Ernst & Young, MM Consult Ltd, Seward Management Ltd, The Repton Group LLC and The Rafael Group, one of the leading Cypriot owned investment groups in Bulgaria.

The well attended meeting was held at the Harvard Club in Mid Town Manhattan and drew some of the top investment firms, hedge funds and members of the US Financial and Investment industry. The Opening address was given by Mr. Aristos Constantine, Trade Commissioner of The Republic of Cyprus, and was followed by Mr. Valentin Stoev, Head of the Bulgarian Trade and Economic Relations Office.

A detailed and insightful presentation regarding the benefits and methods of doing business through Cyprus for foreign investors was offered by an array of top experts in the field. The panel discussion focused on the benefits of investments in Bulgaria, the use of Cyprus as a location for financial holding companies vis-à-vis Bulgaria, and touched on legal, economic and tax developments of importance.

The specific topics elaborated on included: Cyprus tax treaty developments, Investment opportunities in Bulgaria, Investing in Bulgaria via Cyprus, formation and administration of investment funds in Cyprus and Bulgaria.

Mr. Constantine described Cyprus as “the gateway for American corporations conducting business in the Balkans, Russia and the Middle East.” He further pointed out the many benefits of Cyprus that make it a center for business and investment such as its geographic position at the hub of three continents, linking Europe with the Middle East and Asia, state of the art technological, financial and legal infrastructure and a significant investment in intellectual property. The fact that 78% of the Cyprus economy is comprised of the services sector having one of the most highly educated workforces in Europe with a uniquely global perspective, combined with a liberal and attractive tax structure, provides unique benefits to American companies establishing operations there.

Mr. Stoev stated about Bulgaria that “as one of the newest member states of the European Union, since its accession to the European Union, International and in particular U.S. investments in Bulgaria have increased at a soaring rate.”

He further emphasized that “Bulgaria is the largest recipient of foreign direct investment (FDI) per capita in the Balkans region, with a dramatic increase in the last couple of years, a large percentage of which has come through Cyprus.”

Mr. Pedro Fugas of Ernst & Young described Cyprus as one of Europe's leading corporate holding jurisdictions due to its advantageous corporate tax system which includes a flat 10% corporate tax rate and no withholding tax and extensive and favorable double tax treaties with other countries.

Outlining its strategic location and membership to the European Union, Mr. Pelaghias of Seaward Management spoke of the ability for American and other companies to penetrate new markets such as Bulgaria.

Rafael Group, one of the largest Cypriot owned investment Groups in the region with a network of agents and representatives throughout Bulgaria and Cyprus described their own model utilizing Cyprus Special Investment Vehicles (SIVs) for investment into the Balkans. Rafael gave a detailed analysis of its methodology and benefits for its international investors utilizing a model to carry out direct investment in Bulgaria through Cyprus.

In an interview with NEO, at the end of conference, Christos Christodoulou, representing Rafael Group, summarized some of the benefits. “Cyprus offers, and Bulgaria as well, tax advantages… The combination of using Cyprus as the basis of the holding company to have a subsidiary in Bulgaria that will owe the property, gives maximum tax advantage to the investors.” Moreover, “in Bulgaria there are great investment opportunities basically in real estate and energy projects. And Rafael group which is the end destination project management, is offering great opportunities co-investing with the investors. Rafael shares risks and benefits. There are currently 12 projects in place, some of them well under way. It’s not just talking and giving numbers, it’s a fact.”

Mr. Christodoulou went ahead to remind that “Cyprus has traditionally been an international business center. It also has a huge number of international business companies doing activities outside of Cyprus, using the island as a holding company base.”

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