business in the cayman islands 2010

Business in the

cayman islandsSPECIAL REPORT 2010

8 MarketTalk with PwC

14 Cayman Still Leading the Way with Maples and Calder

20 Global Business from A Unique Vantage Point—Profiling Camana Bay

T: +44 (0)20 7125 0579F: +44 (0)20 7183 [email protected]

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Editor: Robert RimskyProject Manager: Kuljit KalerRegional Director: Joseph BoveDesign: The Arland Group

INTRODUCTION

The Cayman Islands consists of a group of three islands in the Caribbean Sea: Grand Cayman, Cayman Brac, and Little Cayman. Located west of Jamaica, and just south

of Cuba, these three islands are home to approximately 60,000 people and receive more than two million visitors by air and sea annually. These numbers are no surprise when you look a little closer at what the Cayman Islands offers. Grand Cayman, the biggest and most developed of the three islands, has something for everyone, from pristine beaches to culinary adventures, and shopping excursions to sporting activities. It is home to not only the majority of the popu-lation, but to many banks and financial institutions where local and international investors find the infrastructure, services and financial expertise matched to the best available worldwide. Cayman Brac and Little Cayman—known as ‘the Sister Islands’—have been rated as one of the top five dive destinations in the world. The absence of major development on these two islands has left unspoiled coral reefs teeming with marine life. Intimate resorts and dive lodges provide visitors with great food, on-site dive shops and peace and quiet.

Over the last 40 years, the Cayman Islands have matured into one of the world’s largest international financial centres, with specialised expertise in both institutional investment and private client offerings. The biggest sectors are banking, mutual funds, captive insurance and corporate services. Regulation and supervision of the financial ser-vices industry is the responsibility of the Cayman Islands Monetary Authority. One reason for the Cayman Islands’ success as an offshore financial centre has been the concentration of top-quality service pro-viders. These include more than 40 of the world’s 50 largest banks and significant operations among the “big four” audit firms, as well as offshore law practices of the highest regard.

Since the introduction of the Mutual Funds Law in 1993, the Cayman Islands has grown to be the world’s leading offshore hedge fund jurisdiction. At the end of 2009, the Cayman Islands Monetary Authority reported 9,486 funds domiciled in the Cay-man Islands. This level of investment has held steady from previ-ous years; a testament to the Cayman Islands stability during a period of global economic turbulence.

The Cayman Islands’ approach to the development of the financial services sector recognises that an appropriate regulatory and interna-tional cooperation environment is not an impediment to, but rather a key driver of, commercial success. The Cayman Islands international cooperation regime has been continually endorsed through third-party evaluations, demonstrating transparency and a continuous commit-ment to ensuring strong working relationships with counterparts in other countries. In its latest assessment (December 2009), the Interna-tional Monetary Fund (IMF) reported high levels of compliance with international standards for banking, securities and insurance regula-tions and recognised Cayman’s financial sector as being serviced by a sophisticated and well-developed service provider structure.

Efforts to continually reinforce Cayman’s already robust anti money laundering and countering of terrorist financing regime over the past year have also proven successful. In addition, the IMF found the Cayman Islands legal framework to be compre-hensive, the money laundering offense in compliance with the re-quirements of UN Conventions, and the terrorist financing offense in line with the Financial Action Task Force standard.

In the area of international cooperation on tax, the Cayman Islands was elevated to the Organisation for Economic Coopera-tion and Development (OECD) ‘white list’ in 2009 for upholding international standards in this important area of global financial services. With 19 tax information exchange agreements in place and several more in various stages of completion, Cayman’s tax information agreement negotiation programme will continue to ensure the country’s commitment to international standards is up-held, while helping to strengthen business opportunities between the Cayman Islands and other countries.

In that regard, the recently formed National Investment Council (NIC) is in place to spearhead the national invest-ment strategy of the Cayman Islands. Consisting of members from the private and public sectors, the NIC is exploring vi-able strategies to stimulate and grow Cayman’s economy. The NIC’s main objective is to identify opportunities for sustain-able development. An integrated body of key business lead-ers across Cayman’s various sectors, the NIC is gathering input and recommendations from the different organisations, boards and committees to create an economic blueprint that will help secure Cayman’s economic future.

Since the NIC’s formation at the start of 2010, the Council has met to draw new commerce and investment to the Cayman Is-lands. To date, the Council has met with and evaluated more than a dozen new projects ranging from tourism projects to fund ad-ministration to the information technology initiatives. NIC Chair-man Mr. William Peguero notes, “We are positive that our col-laborative approach and support of both the private and public services will help us meet pressing demands and set a strong eco-nomic foundation that will position Cayman for economic success into the future.”

It goes without saying that Cayman’s stable economic and po-litical climate, modern infrastructure and excellent quality of life put it on par with the best in the world. With its natural beauty, first class diving, tranquillity, and an accessible array of ameni-ties, it’s easy to see how the Cayman Islands are simultaneously a beautiful home and a wonderful place to visit. When you add a world-class business environment, sound legal framework and responsive Government to the equation, most investors see Cay-man as simply too good to pass up. n

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Common, everyday news, despite its shocking qualities, tends to be-come little more than another hu-

man routine with peaks and valleys. It would be a safe bet to put a fifty pound note with the idea that, in the past few years, most Britons can recall flipping on the tv to hear a BBC reporter state something along the line of: “And today, yet another notch in the roll-ing series of bank failures. After innumerable defaults, we are sad to report that…” Need-less to say, the news of banking failures of epic proportion has peaked in recent years. As the primary financial services regulator, the mis-sion of the Cayman Islands Monetary Author-ity (CIMA) is to enhance the economic wealth and reputation of the Cayman Islands by fos-tering a thriving and growing, competitive, and internationally recognised financial ser-vices industry, through appropriate, respon-sive, cost-effective and efficient supervision and a stable currency.

Cindy Scotland, Managing Director of CIMA, stated: “In Cayman, you haven’t seen the bank closures that you’ve seen around the world. That has to do with the standards we apply to our retail banks—it limits risk. The capital adequacy that has been required of those banks has always been 12-15%. While Basel calls for a minimum of 8-10%, and most countries ask for that, we’ve always gone be-yond that. What we have seen lately is an uptake, numbers are starting to come back in. The Investments and Securities division is seeing an increase in hedge fund registra-tions—people are doing business again.” To date there are 9,486 registered hedge funds in the Cayman Islands, clearly making it the world leader.

The Cayman Islands Monetary Authority is the sole regulator of the financial sector in the Cayman Islands, and thereby responsible for all financial institutions operating under the regulatory laws including money service businesses. CIMA is also responsible for on-going supervision of compliance with AML/CFT obligations. The various regulatory laws provide for licensing, on-site inspections, fit and proper criteria and access to information

in accordance with FATF standards. Regula-tory functions comprise regulation and su-pervision of financial service providers in the Cayman Islands, monitoring of compliance with the money laundering regulations, issu-ance of a regulatory handbook on policies and procedures, and issuance of rules, statements of principle and statements of guidance. Co-operative functions consist of providing assis-tance to overseas regulatory authorities.

The Cayman Islands Monetary Authority has four principal functions: monetary, regu-latory, cooperative and advisory. It is through these functions that CIMA acts in the best economic interests of the Cayman Islands. Through constant diligence, CIMA promotes and maintains a sound financial system in the Cayman Islands and uses its resources in the most efficient and economic way to secure accepted principles of good corporate gover-nance, and endeavor to promote and enhance market confidence, consumer protection, and the reputation of the Cayman Islands as an en-vied financial centre. Via reducing the possi-bility for the use of financial services business for money laundering or other crime, CIMA recognises the international character of finan-cial services/markets and the need to be com-petitive for consumers and suppliers while complying with appropriate and relevant in-ternational standards.

The Authority follows the principles of the Bank for International Settlements’ capi-tal adequacy regime and has set minimum threshold levels of 12% for subsidiaries of banks subject to consolidated supervision and 15% for locally incorporated banks. The Monetary Authority adopted a strategic ini-tiative to upgrade supervisory capabilities to international best practice levels by imple-menting on-site inspections in 1998. The on-site inspection represents the fact-finding part of the supervisory function, which is complemented by the analytical work of the off-site division. On-site inspections are car-ried out for all of the Authority’s licenses, cov-ering banks and trust, insurance companies, company managers and mutual funds. A major objective of the inspection program is

to gain a thorough understanding of a finan-cial service provider’s operations, the risks it faces and how these risks are managed. The inspection reviews the roles performed by the board of directors and senior manage-ment in establishing risk levels, as well as the internal control mechanisms employed to monitor these risks. Risk categories broadly relate to credit, market, liquidity, operational and reputation risk. On-site work includes a review and assessment of Lyle institution’s risk management policies and procedures, control environment, and compliance with laws, regulations and supervisory directives. During the inspection, individual transac-tions are tested to evaluate the effectiveness of the control environment.

Integral to the effective monitoring of in-ternal controls is an independent audit func-tion. In order to avoid duplication of effort, the inspection endeavors to rely on the work of the internal auditors. As part of the inspec-tion, a basis for reliance upon the work of the internal auditor is established. The inspection process relies on the work of the external audi-tors with respect to the fairness of the financial statements. During an inspection, bilateral discussions are held with the external audi-tors to review the strength of the institution’s risk management processes, internal controls, compliance with legislation, and adequacy of loan loss provisions. The overall inspection objectives are to: understand the registrant’s business activities and operating environ-ment while detecting any and all problems of compliance with the law or regulations while simultaneously gathering information on matters identified as requiring policy consid-eration. The inspections are intended to im-prove regulatory efficiency and effectiveness at a level of supreme meticulousness. George McCarthy, chairman of CIMA mentioned: “We want to assure the UK and Europe that the Cayman Islands is definitely an asset to the international community. We are a well regulated jurisdiction, and rather than being guided by any form of misinformation from the past, we would encourage that time be taken to fully research and grasp what the Cayman Islands is all about.” n

A Clear Leader in Regulatory Excellence Why providing strong pro-business

regulation is the only way forward.

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Business in the cayman islands

Why providing strong pro-business regulation is the only way forward.

Since 1997, the Cayman Islands Stock Exchange (CSX) has provided a specialised listing and trading

facility for the specialist products of the Cayman Islands financial industry, in par-ticular investment funds, specialist debt securities and Eurobonds. The CSX also provides a secondary listing facility and an offshore trading venue for securities listed and traded on another recognised exchange and offers domestic companies the ability to list and trade locally. The Cayman Islands’ dominant role in the offshore investment fund and structured finance industry sectors was the catalyst for the establishment of the CSX and is the foundation of its continuing success. The jurisdiction’s dominance is evi-denced by the approximately 10,000 invest-ment funds domiciled in the Cayman Islands and the more than 150 fund administrators licensed there as well as its preferred status internationally for the establishment of so-phisticated structured finance vehicles.

The current value of funds, debt and eq-uity listed on the CSX exceeds US$160 billion. The CSX is the leading offshore exchange in a North American time zone for the listing of mutual funds, hedge funds and structured fi-nance vehicles. The CSX has had over 3,000 listings to date, of which approximately 2,000 have been investment funds. These listings include companies established both in the Cayman Islands and internationally, most recently including listings from investment fund companies based in the Middle East, Southeast Asia, Brazil and South Africa. The CSX has listed investment funds of every form including mutual funds, hedge funds, funds of funds, open and closed ended funds, umbrella funds, master/feeder structures, segregated portfolio/protected cell compa-nies, limited partnerships and unit trusts. The CSX also has listed approximately 1000 struc-tured debt products of every form, including various types of asset-backed, collateralised and credit-linked securities, Eurobonds and, more recently, sukuks and cutting edge ca-tastrophe bonds. In particular, the CSX spe-cialises in the listing of investment funds and structured debt products targeted at the in-

stitutional and high net worth investor. The CSX’s listing rules are sophisticated and de-signed to contemplate innovative structures, combining reasonable and appropriate dis-closure requirements with the flexibility nec-essary for the specialised instruments that list on the Exchange. The listing rules have been drafted and procedures implemented to en-sure that the Exchange meets all international regulatory standards while ensuring that list-ing and continuing obligation requirements are appropriate for the sophistication of the investor pool.

The current financial environment, as well as government and regulatory com-munity reaction to it, is exposing to an ever greater extent the value to both investment fund and structured debt issuers of build-ing in increased transparency and third party oversight to their current and future offerings. Not only are regulators demand-ing this, investors are increasingly requiring it as a condition of making an investment. Transparency and third party oversight are some of the principal benefits a listing on the Cayman Islands Stock Exchange both offers and emphasizes. For its listed investment funds, the Exchange has for many years fa-cilitated transparency through its automat-ed electronic Net Asset Value self-reporting system. An online link to the Exchange’s reporting system enables every listed fund easily to meet its NAV reporting obligations by electronically self-reporting updates of the fund’s net asset values when calcu-lated, whether on a daily, weekly, monthly or quarterly basis, as well as any change in the number of shares outstanding. The updated information is immediately and automatically published on the Exchange’s website, which also includes all previously published updates as well as news releases issued by the fund disclosing any material changes affecting it, to provide an easily ac-cessible, publicly available historical record of the fund’s performance. A significant benefit of the Exchange’s oversight is re-duced risk for the investor, other than that related to the investment strategy itself. The limited costs that apply to listing on the CSX

are more than offset by the evident market-ing advantages to a lower risk offering. Cer-tainly in the current environment, a listing on the CSX places both investment funds and structured debt products in a favour-able position to meet the heightened expec-tations of both investors and regulators.

The positive synergy attained from list-ing on an exchange in the leading domicile in the world for investment funds and struc-tured debt products can be profound. The CSX provides access to the full range and top calibre of service providers in a jurisdiction that has fashioned its legislative, regulatory and administrative approach to enable the utmost efficiency in specialist product op-erations. As a UK HMRC recognised stock exchange, CSX listed securities qualify for investment by UK personal pension plans, personal equity plans, and individual sav-ings accounts, and interest paid on CSX listed securities is exempted from the ap-plication of UK withholding tax. The CSX prides itself on its fast and efficient listing services, delivered from an experienced and highly qualified team that understands the complexities of the specialist products listed on the Exchange, and is committed to meet-ing each issuer’s listing deadline. The listing application process is completely electronic, enabling staff to meet requested document turnaround times. The CSX provides a high quality listing environment and a high level of service at a low cost.

While the overall outlook for financial markets remains troubled in the short term, the Exchange is confident that its traditional qualities, a dynamic approach to listing and the ability to provide timely, flexible and cost effective solutions in fast changing markets, will prove advantageous notwithstanding the current challenges being faced in finan-cial markets internationally. A CSX listing is an inexpensive, efficient and effective way to add credibility, marketing value and a high-er profile to a fund, debt or equity offering while providing institutional investors with the transparency and third party oversight they require. n

The Foremost Trading Platform for Hedge Funds A leader in the offshore market continues to thrive.

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The Cayman Islands are a ma-jor international financial centre and the fifth-largest banking

centre in the world, with $1.5 trillion in banking liabilities. Currently, there are 391 bank and trust companies in The Cay-man Islands, including 43 of the 50 largest banks in the world. Adherence to the reg-ulatory standards of the Basel Committee on Banking Supervision is fundamental to the regulatory approach, and the Cay-man Islands are an active member of the Basel Committee’s Offshore Group of Bank Supervisors. In addition, there exists a unique combination of stability, innova-tive legislation, commercial strength, gov-ernment support, and the absence of cor-porate, capital gains, income, payroll and withholding taxes, on domestic or foreign entities. Banks subscribe to the “know your client” tenet, and the Cayman Is-lands as a jurisdiction maintains a robust anti-money laundering regime, which ex-tends to the proceeds of all serious crime as defined under the ‘gateway’ legislation.

Cayman Islands welcome only sub-stantial, recognised, well run banks and, as a result, banks with household names from all corners of the globe are taking advantage of Cayman’s modern facilities to conduct international business. These banks are licensed under the Banks & Trust Companies Law (2009 Revision) and regulated by the Cayman Islands Monetary Authority. Cayman offers a full range of banking products for local and non-resident clients. Deposit, savings, and checking accounts are widely avail-able at many banks with competitive in-terest rates offered in all major currencies. Time deposits are particularly popular, although it should be realised that inter-est rates correspond to prevailing interna-tional rates at any given time. Other ser-vices readily available include letters of credit, foreign exchange, guarantees, safe custody, commercial loans, and mortgag-es. The Cayman domestic banking scene reflects a buoyant economy making the industry one of the largest employers on

the Island. This status ensures an experi-enced work force well able to respond to market trends.

For many years, Cayman has been un-fairly portrayed by many in the media as a financial centre which does not work to the highest regulatory standards—in real-ity, Cayman works to some of the highest standards in the world and is able to offer international financial services at the high-est levels of sophistication and quality. The global world that business now lives in, needs both the on-shore and offshore fi-nancial centre to succeed, particularly if the world economy is to regain its momentum. Cayman has an important and responsible part to play in the world of financial ser-vices and should rightly be given credit for the high standards and the important part the jurisdiction plays in the global market. Cayman’s close ties to the UK are an im-portant part of the heritage and close rela-tionship and partnership with the financial centre, and the London market has been an important part of Cayman’s success to date and will be a key element to its future growth. Cayman has a developed a finan-cial industry with major international play-ers among the banks, fund administrators, lawyers and accountants. Cayman also has a strong regulation framework, full trans-parency, favourable and stable English law, stable political system and a Government revenue collection system that is ideal for international companies seeking to avoid double taxation or the complicated effort of dealing with double taxation.

Mr. Gonzalo Jalles, head of the Bank-ers Association Cayman states: “The Cayman Islands continues to be a strong jurisdiction, as evidenced by its credit rating and the four times oversubscribed Government public issue last year that was managed by HSBC and achieved the lowest rate ever achieved by a Caribbean issuer.” There are many reasons for Cay-man’s outstanding rating, but in the end, it comes down to continued strong per-formance due to the islands stringent reg-

ulatory standards. Mr. Jalles continued: “The Cayman Banking industry has seen an increased level of regulation as any international financial centre has seen. We have adopted Basel II among others, and our AML/KYC processes were found to be superior to the US and most EU ju-risdictions as recognised by the IMF and the Financial Action Task Force reviews.” When pressed for this year’s market ex-pectations, Mr. Jalles stated: “2010 prom-ises to be another challenging year. For the industry as a whole I see potential new regulation out of the US and Europe as challenges we will have to deal with, we have in the past and we will in the fu-ture, I’m confident that Cayman is well positioned to deal with these challenges.”

Stuart Dack, CEO of Cayman National bank, views Cayman’s impeccable record of non-collapse during the worldwide re-cession as proof positive for the Island’s ability to self-regulate. According to Mr. Dack, “The Cayman Islands, like most jurisdictions in the world, has endured some impact from the worldwide finan-cial crisis, but in many ways the direct affect and cost has been relatively mod-est.” With a smile founded in practical confidence, Mr. Dack continued: “In par-ticular, Cayman has not had to bail out its local banking industry like so many of the banking centres around the world. This has saved Cayman the short-term burden of the costly exercise experienced by many of the on-shore jurisdictions and also will not leave the country burdened with the long-term legacy of funding the kind of catastrophes that hit so many other bank-ing centres. Cayman National played an important part in this as the major local financial organisation with our conserva-tive policies ensuring that our banking sectors came through the recent economic turmoil unscathed by the issues that hit so many banks around the world—a good old fashioned banking model was the an-swer not only to survival but the strength to capitalise on the future when so many are in disarray.” n

The Key to SuccessA robust banking industry.

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How has the financial crisis affected the Cayman Islands over the last two years? What has been the impact on the hedge fund industry specifically?Graeme: The Cayman Islands are a centre of excellence and the domicile of choice for offshore hedge funds (approximately 75% of offshore hedge funds are Cayman domiciled). Consistent with the global ex-perience, Cayman funds in 2008/2009 saw a decline in assets under management as investors deleveraged and as returns were generally negative (albeit hedge funds as a sector outperformed traditional mutual funds and equity markets during the same period). Consequently, in 2008/2009, for the first time really since the early 1990’s, which marks the beginning of the hedge funds industry as we know it today, there was a relatively insignificant net decrease in the number of Cayman Islands domiciled funds. The general conclusion was that overall the hedge fund industry weathered the financial storm relatively well, with 2009 seeing positive performance return to the industry. In many cases the losses of 2008 have now been fully recouped. The contin-uation of this good news is that in late 2009 and into 2010 we are seeing assets being re-allocated back to hedge funds, with many expecting allocations to return to pre-crisis levels during 2010.

For the Cayman Islands specifically, we are now seeing encouraging trends with regards to the launch of newly established Cayman domiciled funds. In the first 6 months of 2010 the Cayman Islands Mon-etary Authority (CIMA) is reporting that new fund launches are running in excess of an average of 100 per month, which is particularly encouraging, and that new launches are significantly outpacing funds that are terminating. At this rate of growth, it is expected that the total number of Cay-

man domiciled funds will soon return to pre-crisis levels.

Over the last year there has been several proposed changes in regulation both in the US and Europe, which of the pro-posed do you foresee having the most sig-nificant impact on the financial services sector in the Cayman Islands? James: The old days in which the US and Europe and European countries on an in-dividual basis legislated in an unsynchro-nised fashion are past. The aftershocks of 2008’s meltdown have ensured that, even though rhetoric may outstrip practical ac-tions, the G20 nations will legislate in a way which has global effect. Consistent with this, the last year has seen a number of proposals which cumulatively have the potential to shake up all financial services centres, including the off-shore financial centres which act as hubs for entities ser-vicing investors globally. I think it is also pretty clear that regulators are targeting the funds industry in a really concerted fashion notwithstanding that all the seri-ous analysis shows that the melt down was not their fault.

The EU’s AIFMD is clearly potentially a game changer, as are the recent US legisla-tive changes to amend the 1940 Advisors Act to remove the exemption which many hedge fund managers took advantage of to avoid the need for registration with SEC – This will also affect non-resident managers who manage funds with either material numbers of investors or mate-rial assets held for US investors. In addi-tion, the US FATCA disclosure legislation also looks as though it has the potential to impact Cayman funds through increasing requirements with regards to reporting of beneficial owners.

It is hard to call the difference in terms of

whether the EU or US regulation will have the greater impact, not least because of the differing importance of the EU Market to Cayman when compared with its US mar-ket. However, while the EU facing market is clearly smaller than the US facing one, it is likely to be much more materially affected, as the AIFMD is going almost certainly to have significant structural and organisa-tional impacts on those caught by it, as well as imposing a significant additional report-ing burden. Also, while at first glance, the key impact might appear to be on EU domi-ciled managers using Cayman based funds, one should not ignore all those funds and managers that use Cayman but who are looking either to invest into Europe or to raise money from European investors who are pretty likely to be affected.

As yet, we don’t know how Cayman’s own regime may need to be adjusted to allow firms based there to continue to tar-get EU markets. Many Cayman based op-erations with US managers will already be registered with SEC and will know how to operate under that regime. The AIFMD re-gime is going to be new and different and, at least on the basis of current drafts could have seismic effects. All we can really say at this point is, we don’t know precisely what the effect will be; only that it will be major.Graeme: There is no doubt that the various regulatory initiatives will have a signifi-cant impact on the hedge funds industry.

However, none of this should be a cause for concern. The Cayman Islands regulation of hedge funds will continue to be appropriate and proportionate, whilst meeting or exceeding international expec-tations. Remember, the Cayman Islands has a long history of regulatory and tax co-operation with major jurisdictions includ-ing the US and the UK. For example, the Mutual Legal Assistance Treaty with the US

MarketTalk:

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What to expect from the proposed AIFM Directive

was signed way back in 1986, resulting in many hundreds of requests for assistance pursuant to this treaty. CIMA, who in 2009 was admitted as a full member of IOSCO, has cooperation arrangements (MOU’s) in place with 15 other financial regulators in-cluding the FSA and SEC. The OECD Tax Information Exchange Agreement (TIEA) model has also been fully embraced, and as of the date of writing the Cayman Islands is party to 19 such TIEA’s, and counting more. Cayman is included on the OECD “white list” of jurisdictions that implement international tax standards.

What impact do you envisage the EU Al-ternative Investment Fund Managers Di-rective having on an international finan-cial centre like the Cayman Islands? James: At the moment, it is really hard to predict with any precision. What is clear, though, is that whatever compromise is finally agreed it will be likely to impose incremental requirements on funds, their managers and also in all likelihood re-quire a legislative reply from Cayman’s government. Certainly, it will be im-portant for Cayman’s Government and CIMA actively to be engaged with the EU and with the businesses who will be affected by the changes to come, in order, to the extent possible, to ensure that the legislation that affects them is propor-tionate and, to the extent a legislative response is needed as well as a business response, that that is implemented in a timely fashion, and is responsive to the needs of all stakeholders.Graeme: In fact, based on any objective analysis, the Cayman Islands already does meet the draft criteria as proposed in both the Parliament and Council versions of the Directive, via existing regulatory coopera-tion agreements in place (and we expect CIMA would enter into further as neces-sary), via the Cayman Islands extensive an-ti-money laundering and anti-terrorist fi-nancing laws and regulations (which have been assessed and positively concluded on by various international bodies such as the FATF and IMF), via the comprehensive net-work of TIEA’s in place (which is reflected in Cayman’s status on the OECD “white list”) and via a willingness to negotiate ad-ditional TIEA’s, including with all relevant EU Member States.

When compromise and reconcilia-tion on the final form of the Directive is achieved, the Cayman response will be bal-anced, appropriate and timely.

There has been discussion recently on the topic of re-domiciling hedge funds from offshore jurisdictions such as the Cayman Islands into certain onshore Eu-ropean jurisdictions. What are you see-ing in this regard?Graeme: There certainly has been active de-bate on this subject, which is not surprising in the current period of regulatory uncer-tainty and change. The reality is that it is actually too early to be able to make a fully informed decision with regards to the full impact of the various regulatory proposals. However, we would be surprised if ulti-mately there was a mass, or even a minor, exodus of hedge funds onshore, given the fact that the Cayman Islands will continue to meet the regulatory standards of the day. In addition, the “price” of the onshore fund, being less flexibility in terms of investment strategy (equating to less return for inves-tors), as well as the potential for an inherent mismatch between the liquidity of a hedge fund portfolio and the liquidity expecta-tions of the onshore fund investor, not to mention the increased compliance cost, are factors that warrant very careful consider-ation - Having said that, asset managers are absolutely right in currently assessing the various domicile choices that are available to them.

What we can say categorically, as is evident in the CIMA statistics referenced above, is that the Cayman Islands has not seen any noticeable loss of market share, and in 2010 is seeing positive inflows both in terms of the number of funds and AUM.

What kind of business does PwC focus on in the Cayman Islands?Graeme: We focus on all market opportu-nities as they develop. Over the past two decades the hedge fund industry has been the primary engine for growth within our assurance practice. However the banking

and insurance sectors are also of significant importance to us and each of these indus-tries are serviced by dedicated teams of professionals.

Although not a single Cayman Islands domiciled bank or financial institution failed as a result of the 2008/9 global fi-nancial crisis, we were not immune, and a relatively small proportion of Cayman reg-istered hedge funds were wound-up due to investment losses. Our advisory prac-tice has been well positioned to provide distressed hedge funds with various crisis management related services as needed, all subject to applicable independence rules.

What is the outlook for the hedge fund industry in Q4 and into 2011? Graeme: Assuming there are no major glob-al economic shock events, the outlook has to be very positive. The Cayman Islands has established itself as the domicile of choice for offshore hedge funds, which was achieved in large part as a result of an appropriate regulatory and legislative framework that was innovative and adaptive. Post the eco-nomic crisis, the status quo is unlikely to be a good option, and the Cayman framework will undoubtedly need to be fine-tuned, to continue to meet internationally accepted regulatory, transparency and cooperation standards. In some ways the market events of the last 2 years represent an opportunity for a long established, appropriately regu-lated and transparent jurisdiction like the Cayman Islands, with all the supporting in-frastructure and service providers in place, to continue to lead the industry towards a new maturity. n

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Graeme Sunley, Asset Management Leader, PricewaterhouseCoopers, Cayman Islands

James Greig, Financial Services Regulatory Partner, PwC Legal, London

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Cayman Islands takes pride in be-ing one of the 5 largest financial centres with offshore banking

services that caters to both local and in-ternational clients. They are well known for their top-of-the-line workforce, secured transactions and a wide range of services offered. Cayman Islands can also boast of its exceptional dependability in the bank-ing industry and, thus, have been operat-ing at a world-class level for quite some time. Amongst a variety of financial servic-es provided, one in which they specialise in is Captive Insurance. Captive Insurance is a special type of insurance that has been in existence for over 30 years now. They are designed to specifically insure the finan-cial risks that may emerge in the parent’s group or company. Basically, what it does is insure a part, if not all, of the parent com-pany’s/group’s risks. The Cayman market has continued to branch out because of the companies that have trusted and benefited from this, and Captive insurance has prov-en beneficial for a variety of risk exposures in the liability and property/casualty mar-kets including healthcare, property, work-ers compensation deductible programs, auto and general liability, E&O, and D&O.

The benefits of Captive Insurance are quite evident: for one, they provide mini-mal insurance cost while making sure that all risks are covered while profits remain. They offer easy ways to manage the han-dling processes of risks and claims from both parties, thereby lending flexibility of coverage during market and interest fluc-tuations. Captives may offer coverage of risks not commonly found in other insur-

ance companies, paving the route to insur-ance markets that can help in the coverage of multifactor risk equations.

With these, clients can be sure of opti-mum support as well as reasonable rates when placing their businesses in Cayman’s hands. One major contributing factor to the success of the Cayman captive industry is expertise of the local service providers giv-en their almost 30 years of experience with this market. Other factors include profes-sional regulatory environment, including capital requirements, investment restric-tions and ability to write third-party busi-ness; modern company and captive insur-ance legislation, including world standard anti-money laundering laws; stable po-litical and economic environment; and the well developed infrastructure, including communications and air service. The Insur-ance Law was first passed in the Cayman Islands in 1979, and since that time, the law has been updated on a periodic basis to ensure the Cayman Islands maintains a strong, established regulatory framework, which enables it to continue its leading po-sition as the domicile of choice for captive insurance.

Because of these factors, it goes without saying that Cayman is firmly established as the domicile of choice for companies seek-ing a formal self-insurance programme that provides actuarial risk coverage and maximum profit retention. There are more than 780 captive insurance companies li-censed in the Cayman Islands, with a total

of 26 captive managment companies. The pre-dominant portion of these continues to be healthcare-related captives where Cay-man has become the number #1 destination worldwide, partly due to its close proxim-ity to the US. However, Cayman has, in re-cent years become, the choice of companies across all commercial and industrial sectors.

A popular product offering in captive insurance is the segregated portfolio com-pany (SPC) structure that caters to small to medium sized companies looking to estab-lish captives, but unable to meet the speci-fied capital requirements individually. Un-der an SPC, there is a legal segregation of the assets and liabilities of individual port-folios—or cells—from each other and from the general assets of the ‘core’ company, so that an insolvent portfolio cannot access the individual assets of any other portfo-lio. The ability of an insolvent portfolio to access the general assets of the core com-pany facilitates beneficial tax treatment for the insured parties. The potential uses are varied and include rent-a-captives, life in-surance, reinsurance and conglomerates. n

Smart DiversificationThe Cayman Islands have silently become the second largest captive insurance market in the world.

number of captives licensed since 31/12/2009

780

Premiums Written us $7.5 billion

total assets under management us $44.7 billion

shareholders equity us $9.2 billion

Captive Statistics the cayman captive Forum 2010 will be at the Ritz-carlton, Grand cayman from november 30th to december 2nd. Plans are underway to provide an informative series of panelists and speak-ers, which aims to maintain the reputation of the conference with unrivalled quality of educational content for the captive owner and those who are seeking information on captive formations in the cayman islands.

11


It is a source of some regret to those of us operating the highly successful and transparent financial services in-

dustry in this outpost of the Empire, and who still remember the Motherland as the cradle of balance and fairness, that most of what the public in the United Kingdom thinks it understands about the Cayman Islands is simply wrong. But, given the tidal wave of mischaraterisation to which the Cayman Islands fiscal regime has been subjected by blame-deflecting politicians and regulators over the past two decades, the public should perhaps be forgiven. The fact that tax evasion and the related expres-sions “tax haven” and “bank secrecy” have been off the table as far as the Cayman Is-lands are concerned for over a decade has hardly been the headline story. Interestingly, the publically available figures deride that proposition - of the $1.795 trillion that cur-rently flow through the Cayman Islands banking system, deposits of European Union residents are shown to be a fiscally insignificant US$35 million all of which are reported and disclosed to the relevant Trea-sury departments.

The truth of matter is more prosaic. The most recent statistics from the Cayman Is-lands Monetary Authority in fact show the relevant flow of funds to be of significant benefit to the City of London and indeed, the City of New York. At the height of the market in 2007, some US$3.6 trillion dol-lars flowed from the international capital markets through Cayman investment ve-hicles to fund managers primarily located in the US and the UK and, contrary to

the oft-repeated canard, in a manner that was fully transparent given the fact that the Cayman Islands has full regulator-to-regulator disclosure consequent upon its IOSCO membership.

When Mr. Gordon Brown addressed Congress and asked “Would the world not be a safer place if jurisdictions like the Cay-man Islands were outlawed?”, the techni-cally correct answer to the question was, “In fact Mr. Brown, no” since throughout the financial crisis no financial institution in the Cayman Islands failed. Depositors in Cayman banks were not requiring of Government guarantees or bank recapitali-sation or TARP (Troubled Asset Relief Pro-gramme) for repayment. The Cayman Is-lands banking system functioned smoothly throughout. Clearly, we were in fact doing something right.

Some would now seek to erase the fine but well-established line between tax eva-sion and tax avoidance and indeed, it is now fashionable to stigmatise both with the same degree of moral opprobrium. But this is surely a distinction fundamental to the maintenance of the rule of law and is it a justifiable criticism of the offshore jurisdic-tion? Tax avoidance is lawful and it arises not because of any “provision”, “lack of regulation” or as President Obama would have it, “loophole” that exists under the off-shore law. Tax avoidance is by definition a function of onshore or domestic legislation. What President Obama meant to say when criticising the 12,000 registered offices lo-cated in a building in the Cayman Islands (and conveniently omitting reference to the 217,000 registered offices located in Dela-ware), is “It is easier for me to gain public support to repeal a provision of domestic US legislation which is intended to prevent US corporations being double taxed by sug-gesting there is some “tax scam” in the Cay-man Islands than it is for me to deal with a powerful Washington lobby of Fortune 500 companies that wish to prevent repeal of what is a much-relied on and lawful provi-

sion of the domestic US tax code”.

The irony is that the corporate registered offices in Delaware and the Cayman Islands that the President would have us assume is evidence of tax wrongdoing are happily enough located in their respective buildings for very similar and perfectly good reason. Both Delaware and the Cayman Islands have superior corporate law which these corporate entities thereby access, in the lat-ter case, for the structuring of hedge funds, structured finance and private equity vehi-cles. It is the sophistication of that Cayman legal regime and a highly efficient court system coupled with low sovereign risk, which makes the Cayman Islands an attrac-tive domicile for structuring offshore invest-ment vehicles. It is for these reasons that the Cayman Islands remain home to 75% of the world’s hedge funds, are the number two offshore jurisdiction, behind Bermuda, for offshore insurance and reinsurance compa-nies, and are ranked in the top 20 jurisdic-tions for bank deposits inter-bank bookings, albeit 93% of the US$1.795 trillion figure of such bookings is institutional. The Cayman Islands are in consequence one of the most convenient jurisdictions for accessing in-ternational capital markets and organising inward investment in the UK and the US. On the latest figures some US$346 billion of hedge fund investment is being directed into the City of London, representing some 20% of the overall net asset figures of Cay-man hedge funds.

It is time for the true function of the Cay-man Islands to be better and more widely understood. The Cayman Islands have provided and continue to provide signifi-cant benefit to the financial services indus-try in the United Kingdom and they do so in a manner that is well-regulated and in accordance with the highest standards of transparency. Mischaracterisation and the resultant misunderstanding of what occurs in Cayman is not only unfair to Cayman, it can only result in unsound UK tax and reg-ulatory policy. n

Inside Perspective: A candid response to constant mischaracterisation

By anthony travers chairmancayman Finance

With the tax burden for UK based companies in-creasing as the govern-

ment aims to ease the strain on the public purse, many may argue that London is losing its allure.

The new 50% tax rate for those earn-ing more than £150,000 has led to re-newed interest in offshore jurisdictions as more and more companies that need not necessarily be located or headquar-tered in high tax jurisdictions seek ways in which to structure their businesses in an effort to reduce their tax liability.

As one of the leading offshore juris-dictions of choice, the benefits of do-ing business in Cayman are multiple. Cayman boasts a well-regulated and transparent tax neutral environment, as evidenced by its inclusion on the Or-ganisation for Economic Co-operation & Development (OECD) “white list” and full International Organization of Securities Commissions (IOSCO) mem-bership. Further, the island offers a first-class infrastructure and an abundance of high-quality professional service pro-viders including accountants, attorneys, administrators and independent direc-tors. In addition, Cayman boasts a close working relationship between govern-ment and the private sector, with the consequence being an efficient business environment, free of time-consuming

bureaucracy. Moreover, Cayman’s legal system is grounded in UK law and the country has exhibited remarkable eco-nomic stability throughout the global recession in the form of low unemploy-ment, a low debt-to-GDP ratio, and AAA rating from Standard and Poors.

The appointment of a service pro-vider such as OBS in the Cayman Is-lands, and its principals in the capacity of directors, can offer the highest level of control by ensuring that management and control of a company is maintained in the Cayman Islands. As a leading ser-vice provider, OBS is able to customise its services to meet the business, tax and regulatory requirements of a wide range of companies that wish to reduce their tax liability.

For a company that wishes to have a presence in Cayman, OBS can provide serviced office facilities, directly con-tracted employees, and global commu-nications, including phone and fax lines, website and email address, as well as bank account services through its affili-ate, Cayman Institutional Bank (CIB).

OBS is also able to offer tailored ser-vices focused on the unique needs of in-vestment managers. For an investment manager of a Cayman Islands registered fund, the principals of OBS who act as directors are able to make business decisions and offer meaningful, value-added leadership. These experienced directors boast a wealth of knowledge in the fund industry and understand the particular needs of fund managers. Familiar with a full range of invest-ment strategies and styles, they have first-hand experience with the issues and challenges regularly encountered. In their personal capacity as directors, they are able to assist with trading ac-

tivities of the fund as well as provide confirmation of trades executed. In ad-dition, OBS offers accounting and ad-ministrative support. Where a Cayman-incorporated investment manager is established, OBS can provide physical services and leadership to that entity as well, ensuring central management and control are maintained in Cayman.

One of the most significant hurdles to reducing the tax liability of a compa-ny is being in a position to demonstrate that management and control are in fact being exercised in the Cayman Islands. OBS can assist in the successful naviga-tion of this hurdle by:

• Engaging directors domiciled inthe Cayman Islands.• Conducting all board meetingsfrom the Cayman Islands. • Holding regular board meetings, evidenced by minutes, to demostrate active control of the company by the offshore directors.• Ensuring that the agenda of the board meetings address appropriate topics including strategic consider-ations and oversight of delegates and service providers.• Having the director of the inves ment manager and the fund be inde-pendent of each other.• Ensuring fund and management company service providers respond to and send correspondence directly to Cayman Islands directors.

OBS is also able to offer its clients same-time zone administrative support and solutions in key locations - Brazil, Ireland and Hong Kong – through its af-filiate dms Management Ltd., the lead-ing provider of offshore independent fund directors, also headquartered in the Cayman Islands. n

A Taxing Reality for UK Companies

Service providers such as Offshore Business Solutions (OBS) have the solutions.

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14


Maples and Calder advises on about 40% of new hedge funds launched in the Cay-

man Islands.

Why are the Cayman Islands such an at-tractive jurisdiction for funds? The Cayman Islands has become the juris-diction of choice for the establishment of alternative investment funds and compa-nies for cross border transactions, particu-larly hedge funds and private equity funds marketed to institutional and sophisticated investors. These Cayman Islands invest-ment funds and companies play a valuable role in the global flow of investment capital by providing a neutral jurisdiction in which investors from multiple jurisdictions can be managed and international businesses can be conducted. They provide much needed liquidity, investment opportunities and ac-cess to capital markets for businesses and investors in both major developed econo-mies and emerging market countries.

The reasons for Cayman’s success in-clude the following:

• The Cayman Islands investment fund is highly regarded by the international in-vestment funds industry and investors and has a hard won reputation as a tried, tested and appropriately regulated invest-ment product. The jurisdiction is positively regarded for compliance with international standards by, amongst others, the Interna-tional Monetary Fund, the OECD, the Fi-nancial Action Task Force, IOSCO and divi-sions of the UK and US government.

• The Cayman Islands has a modern and flexible statutory regime for companies and limited partnerships. The laws of the Cay-man Islands are substantially based upon English common law. This gives Cayman Islands’ law and legal system a common ori-gin with those of many of the jurisdictions of its users, including the US. This means that the fund vehicles and the types of securities which Cayman funds offer are well recog-nised and accepted around the world.

• The attorneys, auditors, mutual fund administrators and other service providers in the Cayman Islands are recognised for their professional expertise. A fund vehicle

can be established and registered with the authorities very quickly.

• The Cayman Islands has no direct tax-es of any kind or exchange controls which will affect cash flow through the fund.

How did the hedge fund industry per-form in Cayman during the financial cri-sis? What new trends have you seen in the market since?

During 2009, many funds were forced to restructure or suspend redemptions in response to the unprecedented global eco-nomic situation. However there were fewer complete blow ups or wind ups than initially expected, with those funds that were partic-ularly highly leveraged being the ones that suffered the most. Many funds experienced drops in value as the markets declined in the last quarter of 2008 and first quarter of 2009, but have since recovered strongly to recoup the lost value as markets have rebounded.

Statistics for the first half of the year are proving the Cayman Islands is still main-taining the lead in hedge fund registrations, with a total of 584 funds formed so far in 2010. This figure is higher than the amount of new equivalent funds registered in Ire-land, Luxembourg and Malta combined and shows that the Cayman Islands is still the jurisdiction of choice for structuring hedge funds. In addition new Cayman company and partnership formations are up over 30% this year compared to last year.

What implications do you see for Cay-man from all the new international regulatory reform occurring around the Hedge Fund industry?

In the US, the Obama Administra-tion has introduced legislation to regulate hedge fund managers and to require cer-tain reports to be made to the US authori-ties to assist in the identification of systemic risks. Many fund managers already regis-ter with the SEC. The new US regulation is unlikely to affect the way in which Cay-man hedge funds are structured. Cayman already requires hedge funds to register in the Cayman Islands with the Cayman Islands Monetary Authority. Most hedge funds also appoint prime brokers, custo-

dians and fund administrators, which are regulated in their home jurisdictions.

Whereas, the draft EU’s AIFM Directive is a controversial attempt by the EU to regu-late the European alternative investment fund industry and particularly the way in which Third Country (i.e. non-EU based) managers and funds can be marketed into the EU. Many institutional and quasi-governmental Euro-pean investors have been actively lobbying the EU to ensure that they are not prevented by the AIFM Directive from investing in some of the world’s best alternative investment funds based in Third Countries (such as the Cayman Islands) and that the funds in which they invest are not lumbered with costly regulation which adds no substantive protection. However, juris-dictions such as Cayman, which hosts the vast majority of hedge funds, should have little dif-ficulty in complying with the conditions set out in the drafts of the AIFM Directive.

The G20 and the OECD have commit-ted to a global approach to the regulation of hedge funds and harmful tax competition. Cayman has responded by agreeing to tax in-formation exchange agreements with major G20/EU nations. In addition, Cayman has received positive reviews from the IMF and the UK Treasury. Also last year, the Cayman Islands Monetary Authority became a full member of IOSCO - acknowledgement that it is recognised by a number of international bodies as meeting international standards.

In your opinion what opportunities exist at the moment for the UK audience?

Given the uncertainties over the draft AIFM Directive and the significant increases in taxation in the UK, we have seen many fund managers begin to review whether they would be better off managing their businesses from outside the EU. Given the Cayman Islands does not tax income or capital gains and pro-vides a business friendly environment, there is a huge opportunity for UK based businesses and fund managers to set up offices in the Cay-man Islands. The Cayman Islands government has recently stated they would welcome new business starts ups in the Cayman Islands. n

Cayman Still Leading the WayMaintaining a dominant position in the global hedge fund market.

Maples and CalderIain McMurdo, PartnerHenry Smith, Partner

Cayman Still Leading the Way

With so many superyachts and some of the world’s most reputable merchant shipping

tonnage registered in the Cayman Islands, it seems reasonable to ask: why? In ad-dressing this query, it is advantageous to examine the registry itself and the factors that make it so successful.

George Town, Cayman Islands, has been a port of British registry since 1903. Addition-ally, for nearly the past two decades, the Cay-man Islands has been a Category 1 member of the prestigious Red Ensign Group (REG)1 and, accordingly, is placed alongside the United Kingdom (UK) as being able to reg-ister vessels of any size, from superyachts to supertankers. The granting of such status is evidence of the highest quality that governs all aspects of the Cayman Registry. Specifical-ly, the comprehensive and modern legal and regulatory framework and the delivery of ef-ficient and consistent services to ensure inter-national standards are maintained. Whilst the Merchant Shipping laws of Cayman are based on UK law, which enjoys an excellent world-wide reputation and a rich heritage, Cayman ensures that its maritime legislation is tailored to meet the particular needs of its global diver-sified fleet. It should also be noted that as a Category 1 Register, the Islands are assessed on an ongoing basis by the UK to ensure qual-ity and consistency within the REG.

The Cayman Islands, an Overseas Ter-ritory of the United Kingdom, maintains a high level of political and judicial stability whilst operating with a considerable level of autonomy. Cayman’s vision focuses on a highly developed quality register which provides efficient registration and technical services in a client-oriented manner.

The Registry operates to the standards set out in the myriad international conventions and treaties, which, directly or indirectly, af-fect shipping. In addition to the usual opera-tional and environmental protection related conventions, there are also various “legal” conventions. For example, a shipowner reg-

istering with the Cayman Islands would be protected under the Limitation of Liability for Maritime Claims Convention with re-spect to maritime claims, and similar pro-tection is provided under the Civil Liability Convention and its related Fund Convention with respect to cargo oil pollution.

There is no specific vessel age limit for registration in Cayman, however, vessels are expected to have been well maintained and, to this end, the Cayman Registry would car-ry out a pre-registration survey on an older vessel, to ensure it and its operation are of the required standard.

On the fiscal side, there is no direct taxa-tion in the Cayman Islands and whilst from a shipowner’s perspective this alone is reason enough to consider registration in Cayman, the application and maintenance of high standards is the principal factor in Cayman’s success as an international ship register. On the broader front, ship registration is also viewed as part of the wider range of financial services which the Cayman Islands, as the fifth largest financial centre in the world, has been providing for several decades.

With respect to the provision of services to ships on its register, Cayman Registry has established representation in strategic loca-tions in the United States, throughout Eu-rope and the Far East. This representation is complemented by a comprehensive system of agreements with seven of the major Clas-sification Societies to undertake survey work on Cayman Islands ships where appropri-ate, and in this context each of the Societies involved has an extensive global network of service locations. This ensures that the Regis-try can provide timely and cost-effective ser-vices to its international clientele, regardless of location and time zone.

In addition, as a British ship, a vessel registered in the Cayman Islands has access to the full services of the British Consulate global network. Furthermore, the UK is at the forefront of the multi-national anti-piracy

task force set up to combat the ongoing pi-racy scourge off the east African coast.

Added to this, the international marine insurance industry is cognisant of the fact that a ship registered with a reputable register poses significantly less risk than one with a less reputable flag state and this translates to lower premiums for ships with a quality reg-ister such as Cayman. To attest to this qual-ity, the Register is recognised on the “White List” of the Paris and Tokyo Memoranda of Understanding (MOUs) on Port State Con-trol which, in essence, are the overseers of operational standards of international ship-ping. White List status bestowed by these two major MOU regions is acknowledged by the industry as a hallmark of the highest measure.

The Cayman Registry is also a leader in being proactive and innovative in the world of international shipping. Recently, under the auspices of the REG, the Cayman Islands has played a leading role in the development of a comprehensive code of standards for large yachts wishing to carry more than the cus-tomary 12 passengers. Ordinarily, any ves-sel carrying 12 or more passengers would be required to comply with the passenger ship requirements of the major international con-ventions, which in some areas are unsuited for application on yachts due to the nature of their design and operation. The code develops a set of alternative and more relevant standards in the more difficult areas and has been devel-oped in response to a perceived need and the rapid evolution within the international yacht sector, both private and commercial.

In conclusion, for a stable and efficient jurisdiction with first-class registration and technical services in a client-focused environ-ment, underpinned by a broad base of exem-plary financial services, in which to register a vessel, be it supertanker or superyacht, the Cayman Islands is the No. 1 choice. The quality of the merchant ships and the sheer number of large yachts already registered in Cayman is a testament to this. n

Cayman Registry Flag of Discernment.

16


F U L L A H E A D .

ARE YOU FLYING THE FLAG?

cishipping.com

4189 - Cayman Registry UK Times Ad | 210mm x 297mm (Full Page - Vertical) | CMYK | 23 July 2010 | BB&P Advertising | www.bbandp.com

Our services include: Vessel Registration; Survey and Certification; Crew Compliance; Vessel Construction Supervision; and bespoke Maritime, and related, Consultancy Services

C AY M A N | H O N G K O N G | S I N G A P O R E | M O N A C O | G R E E C E | J A P A N | U S A | U K

Today, you’ll see the Red Ensign of the Cayman Islands on ships and yachts around the world. Why?

As a Category 1 member of the prestigious Red Ensign Group, we offer vessel registration with a wide range of ownership structures, and with numerous registration options. All backed by modern and robust maritime legislation that allows flexibility and pragmatism without compromise.

With representatives in all the main international shipping centres, you enjoy the highest standard of service, expertise and efficiency - whenever and wherever you need it.

1 The Red Ensign Group is comprised of the maritime administrations of Anguilla, Bermuda, the British Virgin Islands, the Cayman Islands, the Falkland Islands, Gibraltar, Guernsey, Jersey, the Isle of Man, St. Helena, the Turks and Caicos Islands and the United Kingdom. Of these, Bermuda, the Cayman Islands, Gibraltar, the Isle of Man and the UK may register ships of any type and size.

F U L L A H E A D .

ARE YOU FLYING THE FLAG?

cishipping.com

4189 - Cayman Registry UK Times Ad | 210mm x 297mm (Full Page - Vertical) | CMYK | 23 July 2010 | BB&P Advertising | www.bbandp.com

Our services include: Vessel Registration; Survey and Certification; Crew Compliance; Vessel Construction Supervision; and bespoke Maritime, and related, Consultancy Services

C AY M A N | H O N G K O N G | S I N G A P O R E | M O N A C O | G R E E C E | J A P A N | U S A | U K

Today, you’ll see the Red Ensign of the Cayman Islands on ships and yachts around the world. Why?

As a Category 1 member of the prestigious Red Ensign Group, we offer vessel registration with a wide range of ownership structures, and with numerous registration options. All backed by modern and robust maritime legislation that allows flexibility and pragmatism without compromise.

With representatives in all the main international shipping centres, you enjoy the highest standard of service, expertise and efficiency - whenever and wherever you need it.

The Cayman Islands offer a di-verse variety of real estate for you to choose from. As a wonder-

ful place to call home, or second home, and a major hub for financial and business in-stitutions, your needs can be met whether your desire is founded upon residential or commercial property. Given the natu-ral beauty of the islands and a culture and economy that is one of the most robust in the world. It is no wonder that real estate in the Cayman Islands is a popular and lucra-tive investment. There are numerous rea-sons why property investors are attracted to the Cayman Islands real estate markets. One is that there are no restrictions of any kind on foreign property ownership. An-other reason is the tax-free status. With a robust annual inventory of available prop-erties valued at over $1.5 billion dollars to choose from, it is rare not to find what you are looking for at an affordable price. The real estate market continues to grow year after year, and there is no sign that the is-lands are falling out of favour with those who know a good investment when they see one. Even during the current reces-sion prices have held their own compared to other world markets and whilst they dipped over the past year, this has only served to increase investor interest in the market and is expected to recover over the next 12 months and offer some excellent in-vestment opportunities.

If in the market for residential property, the Cayman Islands offer some of the most charming options in the world. With an economy that is a boon to everyone, many consider Cayman an ideal location to settle down. There are a lot of beautiful places in the Caribbean, but the safety and infra-structure are not there. In Cayman, you have the highest standard of living in the Caribbean and one of the highest GDP’s in the World. It has become a very popu-lar spot for second or vacation homes that allow owners to get away and relax for a while. Prices can fluctuate and vary signifi-cantly, depending upon the location of a

home. Beachfront homes will offer breath-taking views of the ocean, but expect to pay a premium to get those views—Apart-ments and Villas at the Ritz Carlton at Dragon Bay for example command prices between US$1million and US$40 million and offer all the benefits of luxury resort living.

An exciting new build coming to Cay-man from Davenport Development Ltd is the San Sebastian. The San Sebastian broke ground in February of 2010, and it is on its way to becoming a complex of one, two and three-bedroom townhouses in South Sound, an up-market development with Spanish flair. It will be built in three phases, each designed around a central garden area that will have lush landscaping, a huge pool, a children’s pool, and function room with kitchen , and a roof terrace with ocean view off the function room so as owners can have two centre parties. Reasonably priced, San Sebastian is ideal for a wide range of prospective buyers, first time buy-ers, middle management and young pro-fessionals, the town homes are available at incredible pre-construction prices. For those looking for a quick getaway, a no fuss, no hassle experience, The Ramada Grand Caymanian Resort promises a world-class vacation in one of the world’s most beauti-ful destinations. The first and only resort in the Cayman Islands to grace the shores of the North Sound Lagoon, you will find ev-ery amenity on site including snorkelling and diving, personal watercraft, beautiful pools, hot tubs, lovely beachfront sun ter-races, restaurant and bar, world-class golf and concierge services. With opportunities for fractional ownership the opportunity to have a second home without the stress of looking after and maintaining the property definitely seems appealing.

The establishment of the Cayman Is-lands Real Estate Brokers Association (CIREBA) in 1987 has played a large part in unifying the industry and creating a higher standard of practice in the local real estate

business. The association currently has 175 member agents and through their Mul-tiple Listing System (MLS) is streamlining sales and listings throughout the island. Through MLS, each real estate listing is made available to all other member agents. This is beneficial as the customers can see all properties available for sale whilst just dealing with one agent. Additionally, the association established a set of commission rates, which meant all agents, were oper-ating on the same rate as other member agents. The Association also set up guide-lines and implemented a system of checks and balances with rules and regulations to rigidly manage the relationship between the public, member brokers and sales as-sociates, which have become industry standard in the Cayman Islands. This gives clients and agents an extra sense of well-deserved security on their transaction.

Due in part to the positive corporate en-

vironment and a government that keeps its hands out of its peoples’ pockets, it nearly goes without saying that the Cayman Is-lands have seen healthy growth in devel-opment and building over the last several years with all types of real estate springing up on the Islands. These developments are world class and offer convenience, com-fort, and all the amenities you would find in any developed city. The major difference between Cayman and the rest of the world: Cayman Islands real estate investments offer no taxes on profits, capital gains, in-come or any withholding taxes charged to foreign investors. Thus, Cayman Islands real estate investment offers an excellent fi-nancial return combined with the security of a British Commonwealth State. Further, there are no estate or death duties payable on Cayman Islands Real Estate or other assets held in the Cayman Islands, mak-ing the Cayman Islands the ideal place to set up trusts, annuities and savings—and, arguably, whence long term mathematics have been implemented, the fact that you keep what is yours makes Cayman the best real estate value anywhere. n

A Vibrant Property MarketAn amazing domicile offers distinct lessons in diversity.

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G R A N D C A Y M A N • C A Y M A N I S L A N D S

G R A N D C A Y M A N • C A Y M A N I S L A N D S

Former US Treasurer, Ivy Baker Preist, once said: “The world is round and the place which

may seem like the end may also be only the beginning.”

These words hold significant mean-ing when viewed in the context of to-day’s global business environment. With emerging economies taking hold and profound market changes underway, en-trepreneurs are now compelled to con-sider new beginnings for businesses like unexpected locations that will enable the best opportunities for growth.

An emerging destination in this re-gard is the western Caribbean archipel-ago of the Cayman Islands with a popu-lation of approximately 60,000 people. Grand Cayman is where a successful investment group, Dart Enterprises has chosen to develop a base for their inter-

national operations.

Few locations around the world have the mix of quality and stability found in the Cayman Islands and even fewer provide such an ideal environment for enjoying life while maximising business and investment potential.

Underscoring the attractiveness of the jurisdiction are the high levels of investment activity already underway. Over the next three to four years, the Cayman Islands economy will benefit from more than US$3 billion in infra-structure and commercial development, such as Camana Bay, Grand Cayman’s world-class community located on 500 acres in the heart of the island—driven by Dart Enterprises Ltd.

Dart Realty (Cayman) Ltd., one of the Dart Enterprises’ subsidiaries and

a leader in real estate development, has redefined modern place making with the creation of Camana Bay. Based on a vi-sion that the Dart family had when they first arrived in Grand Cayman almost 20 years ago, Camana Bay, designed by an award-winning group of architects and planners, has set a new standard for town development. The town architec-ture exemplifies contemporary style, in-spired by traditional Caribbean design. Camana Bay seamlessly merges the traditional friendliness of a waterfront village with the desired comforts and conveniences of an urban centre. Shops, restaurants, offices, school, parks, apart-ments, and soon homes will all be con-nected via thoughtfully landscaped walkways, within easy walking distance from each other. Active with a number of shops, restaurants and entertainment, plus a full roster of weekly, monthly and annual events, life is blossoming at Ca-mana Bay.

Camana Bay offers a robust infra-structure with over 300,000 square feet of world-class designed and engineered office space within structurally sound, traditional Caribbean architecture. State-of-the-art IT infrastructure provides de-pendable business continuity which is critical in today’s globally competitive market. A number of major international businesses have already chosen Camana Bay as the location for their Cayman Is-lands operations with Ernst & Young, Citco, Goldman Sachs, Ogier, and Cay-man National Bank, amongst Camana Bay’s current commercial tenants.

The group of companies that make up Dart Enterprises Ltd. has grown sub-stantially over the past decade and con-tinues to make an impressive contribu-tion to the Caymanian economy. With its

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infrastructure and real estate develop-ment, commerce and diversified invest-ments, conservative estimates calculate the total injection in the local economy to be more than three quarter of a billion dollars since its inception. Directly or through its subsidiary companies, Dart Enterprises locally employs more than 500 people and through its vendors, sub-contractors and service providers con-tributes to the employment of several hundred more.

Since its foray into financial services more than four decades ago, the Cayman Islands has grown into a leading global financial services centre, supported by a sound legal and regulatory framework, excellent infrastructure, and high qual-ity service providers. The country dis-tinguishes itself from other jurisdictions by offering a diverse range of products and services that extend well beyond its tax-neutral status. The Cayman Islands has solidified its important role in global markets by facilitating flow of capital and lowering the cost of doing business.

The global institutional investment community gave the Cayman Islands a resounding vote of confidence following the Cayman government’s November 2009 international bond offering, which achieved the lowest-ever yield by a Ca-

ribbean issuer in a US dollar public bond transaction. This positive outlook has also contributed to a number of incen-tives and new policies recently enacted by the Cayman Islands Government to appeal to individual investors seeking to base themselves on its shores. Of particular relevance is the availability a 25-year direct investment certificate for investors with a net-worth of US$6 mil-lion and who invest at minimum US$2.4 million in the Cayman Islands. The cer-tificate, renewable after 25 years, entitles holders and their families to live and work in the Cayman Islands.

Other directives from the Cayman Is-lands Department of Immigration make it easier for global investors operating businesses from the Cayman Islands to attract and retain top talent. These in-clude recognition by the Cayman Islands Government of critical positions within designated sectors as “key” and grant-ing three- to-five year work permits to certain professional categories. From kindergarten to high school, the Cayman Islands offer excellent education oppor-tunities with a number of excellent pub-lic and private schools. Amongst them is the Cayman International School—a $50million dollar modern facility lo-cated in the heart of Camana Bay offer-ing the International Baccalaureate. At

the tertiary level, the country offers the Cayman Islands Law School, Univer-sity College of the Cayman Islands, and St. Matthew’s School of Medicine and School of Veterinary Medicine.

Globally connected and multi-cultur-al, the Cayman Islands is a prestigious destination for all finance-related indus-tries and other knowledge-based pro-fessionals seeking a new vantage point from which to operate their businesses.

Camana Bay provides concierge-type services for potential investors that facil-itate decisions to relocate to the Cayman Islands. These services range from help-ing to secure business and residential accommodations to making referrals to agencies and firms that can facilitate the necessary legal and licensing require-ments.

For investors, Camana Bay offers a rare opportunity to be part of a truly sophisticated and unique Caribbean community. n

For more information about establishing your business in the cayman islands, please contact Rick Cobb at 00 1 345 640 3648 or [email protected]

Split into three distinct islands, Cayman offers varied options that suit every getaway. The

largest of the three islands, Grand Cayman, provides the largest selection of resorts and dining experiences. Grand Cayman has the infrastructure of most large state-side cities but still offers the seclusion of a quaint Caribbean destination with barefoot vacation experiences. The East End of the island has the natural beauty, diving and water sports, whereas the West side has the infrastructure, banks and law firms. There is world class shopping as well as dozens of restaurants to choose from. With six ma-jor airlines arriving daily, it is an easy flight from most of North America and Europe. In the past ten years, the cruise industry has discovered Grand Cayman and all the major lines lay anchor in the George Town harbour on an almost daily basis.

Cayman Brac is ideal for those who are looking for a stunning island with a slow pace. Named for its impressive limestone bluffs, the island is an attraction for vaca-tioners who really want to get away and just unwind. Cayman Brac provides visitors with unrivalled views and pristine sandy beachfronts.The Brac offers excellent diving and adventures for those into rock climbing, exploring and hiking. Cayman Brac’s un-crowded roads are a reflection of how it was in Grand Cayman 20 years ago. Little Cay-man is perfect for people who are looking to holiday within close proximity to world class diving, marine life and quiet beaches. With Little Cayman being the smallest of the three islands, it is also the least devel-oped and has the atmosphere of a small hamlet where everyone knows your name. Many local professionals living and work-ing full-time on Grand Cayman will vaca-tion on Little Cayman to flush out the stress of Grand Cayman’s corporate lifestyle. One can drive from one end of Little Cayman to the other end without passing another ve-hicle. True island living.

Grand Cayman is, by far, the most well known of the three islands, but her sisters, Cayman Brac and Little Cayman, have be-come world famous for their spectacular wall diving and the refined sense of re-laxed Caribbean life they offer. With over 250 dive sites to choose from, Grand Cay-man offers some of the greatest underwa-ter diversity anywhere in the world. It’s all here: deep, dramatic walls adorned with sponges and corals in a stunning array of colours; shallow reefs filled with school-ing fish and small invertebrates; and an assortment of wrecks, each with their own peculiar character and special inhabitants. There’s also the world’s best 12-foot dive, the legendary Stingray City in the North Sound of Grand Cayman Island. You don’t need to be a diver to appreciate the remark-able ocean waters of Cayman—most visi-tors simply look forward to having a drink before basking in the opportunity to dip their newly tanned bodies into 80-degree waters that offer visibility exceeding 100 feet. Also noteworthy, the Cayman Islands will in a few months, sink the U.S.S. Kit-tiwake in an effort to create a new dive at-traction and artificial reef, while providing much needed relief for some of the most frequently visited dive sites. The U.S.S. Kittiwake, a de-commissioned naval ship, will be sunk on the north end of Grand Cayman’s Seven Mile Beach, providing un-derwater enthusiasts of all skill levels with a new year-round diving destination that is easy to access. If sightseeing is what you prefer, you could opt for a more down-to-earth experience of the islands by renting a scooter, soft-top jeep, convertible or mini-van. Horse riding is the best way to get off the beaten track: saddle up and head off on horseback, though natural woodland or along a beach.

If disinterested in natural wonders, there are plenty of manmade options to choose from. Topside opportunities include fine dining, world class shopping, five star

hotels and various entertainment venues and shows await you. Stroll the storefronts of George Town and you’ll find some of the best duty-free shops anywhere in the Carib-bean. An amazing array of quality luxury goods awaits you.

The Cayman Islands has everything to satisfy the appetite of food lovers every-where with its extensive selection of res-taurants. There are over 100 restaurants in the Cayman Islands including famed cor-porate chains, independent boutiques and small native style diners. Traditional Cay-manian cuisine will feature many items unfamiliar to you as well as well-known fa-vourites such as conch, lobster and shrimp. Local dishes such as stewed turtle, Cay-man style fish and salt beef rundown are a big hit with travelling food Casanovas. The cosmopolitan nature of Cayman’s society is not overlooked with a wide variety of in-ternational tastes catered for. In addition to the local Caymanian food, you’ll find virtu-ally all cuisine—from Jamaican and Cuban to Italian or Indian. Whether you are look-ing for a place to enjoy a casual beachside lunch, a dinner at sunset or an extravagant banquet, you are sure to find just the right place and delicacies to suit your taste.

The most popular topside spot to visit in recent years has been Seven Mile Beach. Situated on Grand Cayman’s west shore, Seven Mile Beach boasts the same gor-geous clear waters and coral sands as the rest of the island, along with beach bars, a lively atmosphere and abundant restau-rants. Whatever experience you seek, be it driving, zipping along palm-lined streets on a scooter, strolling downtown George Town with good mates or kicking flippers in warm water, Cayman Islands vacations go at an easy pace. Time spent beneath the blue skies of this British Overseas Territory will leave you feeling refreshed, and ready to get back to work—if you can convince yourself to leave. n

Destination of Self DeterminationThe Cayman Islands offer natural and manmade wonders alike.

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Since first being sighted by Chris-topher Columbus on his fourth and final voyage to the New

World, the Cayman Islands have al-ways been a chosen place of escape for wise, hardworking peoples with a penchant for independent flexibility. Famed as a great place to register yachts, the Caymans have recently seen a large push from patrons whose desired track of travel is the sky. The Civil Aviation Author-ity of the Cayman Islands (CAACI) is the regulatory body controlling the aviation industry throughout the Cayman Islands. The role of the Cayman Civil Aviation Au-thority is primarily to function as the regu-latory organisation responsible for safety oversight and economic regulation of the aviation industry throughout the territory. It is by this measure that the Authority en-sures the Cayman Islands aviation indus-try conforms to the standards and recom-mended practices of the International Civil Aviation Organisation (ICAO).

The Cayman Islands Register has been in existence since the 1960s, and the vast majority of aircraft registered are private executive aircraft. The Cayman Islands Aircraft Registry is the registry of choice for many owners and management companies with corporate aircraft ranging from Cessna to Gulfstream, Airbus and Boeing Business Jets. Standards are rigid and specifications exact to qualify, and this has led to the reg-ister being highly respected and recognised throughout the aviation industry interna-tionally. The CAACI works in close part-nership with a specialised group of legal firms and Cayman Islands Government au-thorities to ensure that clients have the most comprehensive counsel on every avenue of law, custom law, tax and insurance.

In recent years, the Cayman Register has continued to see rapid growth in vol-ume for both commercial and corporate air-craft. In broad terms, this growth has been exponential, and partially fueled by Middle Eastern and Asian industry moguls who have sought to maintain strategic position-

ing of important aircraft between Europe, the United States, South America, Cen-tral America and Africa, so as to coincide with their desire to increase market share in these key locations. In most instances, these aircraft are owned by high net worth individuals or large multinational corpo-rations who view Cayman as the jurisdic-tion of choice for registration of such air-craft. One of the main reasons Cayman is so attractive for aircraft registration is the countries financial stability, along with a very knowledgable service sector that has specialisation in airline financing. Most of the companies or individuals who register in Cayman already use the jurisdiction for other purposes. Owners and operators en-joy an administration which is prepared to accept more than one internationally recog-nised set of airworthiness requirements, various flight crew licenses for validation and a low profile registration mark which some operators consider of value when operating in areas of the world which may be subject to certain security risks or po-litical instability. The Cayman registration mark “VP-C” is seen as a neutral mark as opposed to a major European mark or the American mark. Further, owners and oper-ators have expressed high satisfaction with the responsiveness of the Cayman Islands Civil Aviation Authority in dealing with their enquiries and requirements. This is made possible by the absence of the degree of administrative bureaucracy encountered in some other major jurisdictions. For ex-ample, some jurisdictions may impose re-quirements that an aircraft registered in that jurisdiction must be based and primar-ily used in that jurisdiction. Registration in Cayman is not subject to any such require-ments and Cayman registered aircraft may be operated anywhere in the world.

On an aircraft finance transaction, it is imperative that there is no tax leakage in the deal. With the increasing size of recent transactions, even a small number of basis tax points can amount to a large overall tax charge. In Cayman, however, there is no corporation or other tax on any company

carrying business in or outside Cayman. Cayman companies are entitled to receive an undertaking from the government, there-by exempting them from future taxation (if any). Further, the ready availability of pro-fessional managers and administrators in Cayman means that Cayman companies may be centrally managed and controlled in Cayman which helps on-shore tax counsel gain comfort that the company will not be taxable in the relevant on-shore jurisdiction. The Cayman Islands also offers a full range of professional and administrative services necessary to ensure all legal and other re-quirements may be properly met and to ensure international respect for the Register.

Indeed, just as the idea of owning a large corporate aircraft from which busi-ness can be grown in a moment’s notice, anywhere on the globe, is quite in line with the natural drive toward deepen-ing competitive advantages as felt by the majority of top-tier entrepreneurs, so too are the risks. If one should fail to establish proper asset protection for their vehicles of expansion, all personal assets techni-cally remain in jeopardy. A Cayman cor-poration can acquire just about any type of income earning asset or trust with imme-diate advantages based upon protection—once a Cayman corporation acquires the prescribed asset, a trust for that asset can be initiated and income received from the asset is usually received as tax-free. Apart from these tangible benefits, the Civil Aviation Authority intends to continue to ensure aviation safety through regula-tory excellence. The Authority stands by its flawless safety record over the years, and plans on continuing to build off its key principals of partnership that include: sustainability for all parties involved via a non-bureaucratic, business-first approach founded upon safety of the traveling air-ports/property, obligations to maintain international protocol, procedures, and continuance of its sustainable regulatory handbook so as to meet international avia-tion standards through committed, long-standing partnerships of mutual benefit. n

Flying HighWhat good is an aircraft if bureaucratic red tape keeps her grounded?

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The Grand Caymanian Resort Is Your Caribbean Playground!

The Ramada Grand Caymanian Resort promises a world-class vacation in one of the world's most

beautiful destinations. Luxury, convenience and fun are the hallmarks of this award-winning resort.

Gracing the shores of the North Sound Lagoon, you will fi nd every amenity on site including snor-

kelling and diving, personal watercrafts, pools, hot tubs. huge beachfront sun terraces, restaurant

and bar, world-class golf, concierge services and kids club...the list is endless! If you ever do feel

the need to venture away from the resort, you will discover the Cayman Islands legendary hospital-

ity and friendliness in an island environment that is refreshingly safe and welcoming.

The resort is built in a British-Caribbean style and includes: a swimming pool, children’s pool, two

large ocean front hot-tubs, tennis court, an air-conditioned restaurant and bar and a dive and water

sports sundry shop. The large one and two bedroom suites are beautifully appointed and furnished

and come complete with every item necessary for a wonderful vacation experience. The brand new

phase of the Ramada Grand Caymanian Resort will be a 44 unit Condo-Hotel. Each unit will be a two

bedroom with most of them providing a lock off feature. These units are offered for whole-ownership.

T: 345-949-3100 • F: 345 949-3161 • Email: [email protected] • www.grandcaymanian.ky

Ramada Ad.indd 1-2 8/17/10 2:21 PM

business in the cayman islands 2010

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