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CFO SYMPOSIUM 2012: INVESTING IN EMERGING MARKETS 20 June 2012 Jean Pierre Koolmees Vistra Singapore
CFO SYMPOSIUM 2012: INVESTING IN EMERGING MARKETS
20 June 2012
Jean Pierre KoolmeesVistra Singapore
Agenda
• Introduction to Vistra
• Investing in Emerging Markets – What’s the Outlook?
• Practical Structures for Investing in Emerging Markets
• Alternative Structures for Pre-IPO / Family Holding / Operating Activities
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INTRODUCTION TO VISTRA
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About Vistra
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• Global independent provider of trust, fiduciary, corporate and funds services
• Established in 2006, with roots dating back to 1982
• 2009: Entry of IK Investment Partner (Private Equity firm) as key shareholder
• 2011: IK Investment Partners acquires Offshore Incorporations group and merge the corporate service part of the Group with Vistra.
• Today: A global leader in trust and corporate service , boasting the most balanced geographic reach globally
• 350 professionals in 23 offices, 19 jurisdictions
• Personal and tailored services
Vistra Milestones (1)
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MBI of Chiltern (LDB/Jersey)
Q2 2006 Q4 2006 Q1 2007 Q2 2007 Q3 2007 Q2 2008
Q2 2008 Q1 2009 Q2 2009 Q1 2010 Q3 2010 Q3 2010
Q3 2010 Q3 2010 Q4 2010 Q4 2010
Launch ofVISTRA Brand
Start-UpGVA & AMS
Acquisition Benelux Trust (LUX)
Acquisition Monterey (NL & NA)
Acquisition ACSA (CYPRUS)
Set up of Funds services (Jersey & Lux)
Start-up HONG KONG
Start-UpIRELAND (brass plate)
Opening UAE (based in Dubai)
Start-upSINGAPORE
AcquisitionIBSL (MALTA)
Partnership with Centrapriv(ZURICH)
Opening NEW YORK (rep. office)
Opening FRANKFURT(rep. office)
Acquisitionin Guangzhou(CHINA)
Q3 2011
Merger ofThe Offshore Incorporations Group (ASIA)
Vistra Milestones (2)
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Acquisition Cynosure(mainland China)
Q4 2011 Q1 2012 Q4 2012 Q4 2012
Set up of Funds services in Hong Kong
Start-UpMauritius
Acquisition FTC Trust (Netherlands)
BELGIUMTel +31 76 560 [email protected]
CHINABeijingTel +86 10 8592 [email protected] +86 20 8384 8101 [email protected] +86 21 6361 [email protected]
CURAÇAOTel +599 9 736 [email protected]
CYPRUSTel +357 25 [email protected]
GERMANYTel +49 69 583 [email protected]
HONG KONGTel +852 2521 [email protected]
IRELANDTel +353 1 665 5999 [email protected]
JERSEYTel +44 1534 504 [email protected]
LUXEMBOURGTel +352 42 22 29 [email protected]
MALTATel +356 21 314 259 [email protected]
MAURITIUSTel +230 403 [email protected]
NETHERLANDSAmsterdamTel +31 88 560 9950 [email protected] +31 88 560 9900 [email protected]
NEW ZEALANDTel +44 20 7268 2430 [email protected]
SINGAPORETel +65 6438 1330 [email protected]
SWITZERLANDGenevaTel +41 22 319 18 [email protected] +41 44 296 68 68 [email protected]
TAIWANTel +886 2 2718 1220 [email protected]
UNITED ARAB EMIRATESTel +971 4 401 [email protected]
UNITED KINGDOMTel +44 20 7268 2430 [email protected]
UNITED STATESTel +1 212 787 1848 [email protected]
Our Presence
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A network specifically developed to provide the best possible and individually tailored solutions
Creating Solutions
GLOBAL PRESENCE - LOCAL KNOWLEDGE
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• Offshore and onshore solutions for thoseoperating in the worldwide marketplace
• Advice on maximising jurisdictional andcorporate framework advantages
• Provision of management and administrationfacilities
Corporate Services
Executive Incentives & Retirements plans
• Variety of executive incentive arrangements
Intellectual Property
• Management and performance of clients assets(licensee performance, collecting royalties,renewing licenses…)
Company formation & Management
Offshore Incorporations
• In all premier jurisdictions• Wide range of shelf companies
Escrow Services
• From security arrangement to LoC• Transactions and projects where completionis only reached over a period of time
Securitisation Vehicles
• Setting up, management, accountingand administration
Trusts & Foundations
• Full range of trust and foundation andmanagement options
• Correct vehicle in correct jurisdiction• Tax and estate planning, employee benefits,charitable trusts and foundation.
Trustee & Fiduciary Services
Estate Planning
• Trust and civil law foundation Correct vehicle incorrect jurisdiction• Corporate ownership structures (when realestate, art collection…)
Family Office
• Bespoke, personal and professional service basedon the multi-family office model• Structuring and management of family’s assets
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Funds Services (Hong Kong, Jersey & Luxembourg)
Fund Formation
• Development of the fund structure andset up of fund vehicles
• Coordination of all advice• Obtaining regulatory approval
Fund Administration
• Independent and flexible fund administrationplatform
• Virtual middle and back office with the necessaryinfrastructure
Transfer Agency
• Dealing with subscriptions and redemptions• Maintaining the register of investors
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Business Services & Outsourcing
Accounting Services
• From private investment holding tointernational trading companies• Accounting and taxation complianceservices for companies• Meeting of statutory requirements• IFRS accounting• Consolidation services
Bank Account Services
• Bank accounts opening in onshoreand offshore locations
Trade & Treasury Services
• Comprehensive range of trade supportservices
• Management of Letters of Credit, tradedocumentation and banking
Payroll & Outsourcing Services
• Full support and comprehensive range of services
China Business Solutions
• Registration and on-going administration processfor a China business entity
Customised Office Packages
• Customised suite of post incorporation office servicesaimed at creating presence and substance
Vistra’s Key Strengths
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What sets us apart from the competition is the combination of the following key characteristics
Truly Global
TrulyIndependent
• 23 offices• “One-stop” services shop • Strong local market knowledge and jurisdictional expertise
• No affiliation to a bank, law firm or accountancy firm
• Relationship driven and product oriented (tailormade)• Timely delivery• Quality of services• Confidentiality, discretion and data protection
TrulyPersonal
INVESTING IN EMERGING MARKETS –WHAT’S THE OUTLOOK?
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Leading Emerging Markets – Drivers of Global Growth
Emerging markets
BRIC
SEAAfrica
By 2020, the BRICs are expected to account for nearly 50% of all global GDP growth
Developing Asia is still projected to grow most rapidly at 7½ percent on average during 2012–13
Economic activity in the Middle East and North Africa is expected to accelerate in 2012-13
South Africa—and the region's output is expected to expand by around 5½ percent in 2012
Estimates show that 70% of world growth over the next few years will come from emerging markets, with China and India accounting for 40% of that growth.
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• Macroeconomic Outlook
� Growth prospects expected to moderate in the short term
� Slowdown in domestic demand following a period of rising inflation and interest rates in 2011
� However, stable Foreign Direct Investment (FDI) flows into these economies suggest that the medium to long-term outlook remains optimistic
• Challenges ahead
� Trade exposure to Eurozone: EU makes up at least a fifth of total exports for BRICs, with Russia particularly exposed
� Short-term capital is exiting BRICs : Equity outflows and stock market falls
� Declining confidence of businesses which could undermine investment plans
BRICs: Support for Weak Global Economy?
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Africa: Changing Landscape?
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• Macroeconomic Outlook
� With the recovery of North African economies and sustained improvement in other regions, growth across the continent is expected to accelerate to 4.5% in 2012 and 4.8% in 2013
� Short-term problems for the world economy remain as Europe confronts its debt crisis.
� Commodity prices -- crucial for Africa -- have declined from their peak due to weaker demand and increased supply, and some could fall further.
• Challenges ahead
� Slowing of the global economy has hit some African countries, notably those whose main export markets are in Europe and the United States
� Sustenance, broadening and deepening of political and economic reforms
� Building of infrastructure and human capital
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SEA: Standing on Solid Grounds?
• Macroeconomic Outlook
�Expansion in Indonesia, Thailand, Malaysia, Philippines and Vietnam will climb to 5.6% in 2012, up from 5.3% in 2011
�Global uncertainties and natural disasters shed a negative light on the growth prospects of the region
• Challenges ahead
�Need to find new drivers for long-term sustainable growth
�Need to increase domestic demand to offset slowdown in export demand
�Balance between growth and inflation
Emerging Markets – One size Fits All?
Brazil Russia India China Africa SEA
Industry Agriculture (resource-rich)
Oil & natural gas (resource-rich)
Technology services (people-rich)
Manufacturing (people-rich)
Naturalresources (resource-rich)
Agriculture/ Manufacturing
CommonInboundInvestmentLocation(s)
NetherlandsLuxembourg
Cyprus MauritiusSingapore
Hong Kong Mauritius Singapore
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General Considerations for Investments
• SWOT Analysis
• Acquisition/merger/new set-upBusiness
Environment
• Financing of investment
• Taxation implications
• Projection of returnsFinance
• Local laws
• Licensing & regulatory requirements
Legal
• Local culture
• Local manpower resourcesHuman Capital
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PRACTICAL STRUCTURES FOR INVESTING IN
EMERGING MARKETS
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Practical Structures for BRIC
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Practical Structures - Brazil• Although Brazil doesn’t impose dividend withholding tax, Brazil has “anti-avoidance” tax rules targeted at doing business with 55 tax haven countries (countries which do not tax income or tax below 20%)
• Brazil also has a separate list of 9 countries with “privileged tax regime” (include Luxembourg & Netherlands)
• Luxembourg holding companies have been removed from the list on 28 March 2011
• Suspensive effect on inclusion of Netherlands on 25 June 2010
• Both Luxembourg and Netherlands have domestic withholding tax of 15% on dividends (can be reduced by treaty / EU Directive)
Investor
Netherlands/
Luxembourg
Brazil
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Practical Structures - Russia
• Dividend Withholding Tax (DWT) from Russia to Cyprus 5% (or 10% for investments less than 100,000 Euro)
• Dividend received tax exempt in Cyprus
• No dividend WHT from Cyprus
• Sale of shares in Russian company also tax exempt on basis of the capital gains exemption
Investor
Cyprus
Russia100
(after tax
profit)
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95
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Practical Structures - India• Mainly for exemption of capital gains
• Ongoing debate on Mauritius-India treaty
• Singapore increasingly popular for routing investments into India
• No capital gains tax in Singapore & under Singapore-India DTA, no taxing rights to India for gain on sale of shares provided that the Singapore company is not a conduit
• Dividend received is tax exempt in Singapore (if conditions fulfilled) / taxed at effective rate of 3% in Mauritius
• No dividend WHT from Singapore/ Mauritius
Investor
Mauritius/
Singapore
India
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HK Holding
Company
Investor
PRC WFOE/FICE
Practical Structures - China
• Dividend Withholding Tax (DWT) from PRC to Hong Kong 5%
• Dividend received tax exempt in Hong Kong
• No dividend WHT from Hong Kong
• No capital gains tax in Hong Kong
• Profits are “locked” in Hong Kong instead of PRC
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Investor
HK Holding/ Trading
Company
PRC WFOE/FICE
100%
100%
Practical Structures - China
• Closer Economic Partnership Arrangement (CEPA) between HK & PRC
• Trading profits booked in HK are automatically not booked in PRC
• Offshore profits claim in HK, therefore profits not subject to tax in HK
• Transactions to be at arm’s length
• No VAT/import/export duties in HK
Practical Structures for Africa
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Practical Structures - Africa
• Why Mauritius:� Has widest treaty network with African countries
� Investment Promotion and Protection Agreement with Africa (increases protection & investor confidence)
• Reduced withholding tax rates covered in treaties
• Mauritius GBL1 effectively taxed at 3%
• No dividend WHT from Mauritius
Investor
Mauritius
Africa
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Practical Structures for SEA
Practical Structures - SEA
•No capital gains tax in Singapore
•Dividend received tax exempt in Singapore (if conditions fulfilled)
•No dividend WHT from Singapore
•Singapore is one of the most attractive investment holding location in the region due to its extensive treaty network
Investor
Singapore
Indonesia/
Vietnam/
Thailand/
Philippines
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ALTERNATIVE STRUCTURES FOR
PRE-IPO/ FAMILY HOLDING /
OPERATING ACTIVITIES
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Using Trust to Hold Pre-IPO Shares
Settlor(Client)
Trustee
Holding Company
TrustBeneficiaries
Pre-IPO Shares
• Proper wealth planning in advance - Easier
to transfer assets before IPO, as it is subject to less regulatory constraints and disclosure.
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Settlor(Client)
Trustee
SPTC
PurposeTrust
Beneficiaries
Trust Assets
Trust
Holding Company• Settlor may be appointed as director
of the SPTC and assume the role of
Trustee to gain full control of the Trust.
Trust Administrator
Singapore Private Trust Company (SPTC)
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Trust with Limited Partnership
Limited Partnership
Settlor(Client)
Trustee
TrustBeneficiaries
Trust Assets
Holding Company
• Settlor may be appointed as director of the Corporate
General Partner to gain full management and investment
control of the Trust Assets.
• Trustee will be guided by Settlor’s written letter of
wishes in making distributions to the Beneficiaries.
CorporateGeneral Partner
CorporateLimited Partner
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Contact Details
Jean Pierre Koolmees [email protected] DID: (65)6854 8021
Christine Tan [email protected] DID: (65)6854 8061
Angie Han [email protected] DID: (65)6854 8053
Mehjar Auckbarally [email protected] DID: (65)6854 8017
Lisa Tan [email protected] DID: (65)6854 8015
Disclaimer: The contents of this presentation are made available for information purposes only. They do
not constitute an offer. Nothing in this presentation should be relied upon as constituting legal or other
professional advice and advice must be obtained from a suitably qualified professional before applying
the information to particular circumstances.
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