Business Bermuda Nexus - November 2012 by Bermuda Sun Ltd

THE BUSINESS BERMUDA

NEXUS NOVEMBER

2012

IN THIS ISSUE MESSAGE FROM THE CEO BUSINESS BERMUDA’S NEW ECONOMIC IMPACT STUDY PRIVATE EQUITY IN BERMUDA: SO MUCH MORE ISLAMIC FINANCE IN BERMUDA: AN INTERVIEW WITH MUHAMMAD KHAN

“Bermuda ranks as one of the largest economic actors in the world economy. In 2010, its two-way trade with the rest of the world was $80 billion. In addition, Bermuda’s multinationals generated an additional $100 billion of direct sales in these ten large markets through its subsidiaries in the manufacturing and ﬁnancial services sectors.” p.4

THE RISE OF THE INSURANCE LINKED SECURITIES MARKET AFRICA RISING: EXPERTLY NAVIGATING AFRICA’S GROWING FUND MARKET BERMUDA - EFFICIENT CAPITAL MOVEMENT ISLAND HOPPING ON THE HONG KONG STOCK EXCHANGE

PROFESSIONAL COMMENTARY FROM BUSINESS BERMUDA

BUSINESS |

PROFESSIONAL COMMENTARY FROM BUSINESS BERMUDA

CEO MESSAGE: GIVING A VOICE TO BERMUDA’S ECONOMIC IMPACT ABROAD It is an election year in the United States, and, as this article goes to press, America is in the process of choosing its direction for the next four years. This year has seen sharpened rhetoric, heightened partisanship, and Bermuda once again found itself in the cross-hairs of debate about U.S. tax and economic policy. CHERYL PACKWOOD CEO, BUSINESS BERMUDA

For Bermudians, this is often a troubling time as we ﬁnd ourselves under attack with no vote in the election and no voice to defend ourselves. Interest in Bermuda from everyday people in the complex role that we, as a jurisdiction, play in the global economy as an important partner to U.S. businesses and ultimately almost every U.S. citizen seems limited at best. There is no doubt that we live in an increasingly complicated world. The interconnectedness of economies has created broad alliances and new dependencies, which are designed to encourage cooperation and drive the free ﬂow of capital with

In Bermuda, we are a small microcosm of all that happens in the rest of the world. We have our own political and economic dynamic and a media that covers issues looking at them largely from the inside out. So what is our role and how do we explain the value we create and the opportunities we present for the global economy?

For more detail, I encourage you to read the article in this edition of NEXUS by Charles Ludolph, a U.S.-based economist who worked for the Commerce Department under both President George H.W. Bush and President Bill Clinton, you are also invited to read the full report found at www.businessbermuda.org.

In the U.S., with unemployment hovering at around 8 percent and budget deﬁcits above a trillion dollars and national debt in the multi-trillion dollar range, there are really no easy answers. In Europe, the struggle to come to grips with social spending and escalating debt threatens to destroy the social contract that has existed between countries and their citizens with implications and concerns about the long-term stability of the European Union. In the Gulf/Middle East, the struggle for democracy and new voices for vast groups of people who have long felt underrepresented has given rise to new tensions that bring on a cloud of economic uncertainty. The net effect of all of this is potential spillover into Asia and Latin America, which would give rise to a myriad of new issues in those nations.

If we were given a voice in the U.S. election, we feel we could make a strong case that we are not a place that seeks to siphon off revenue from the American government and reduce its capacity to provide for its citizens. Rather, we are a partner whose products and services help insure homes from the threat of catastrophic storms, reinsure the risk of droughts that impact crops, and protect farms. It is the funds that are domiciled in Bermuda that enable capital from around the world to be invested in U.S. stocks and bonds that help support companies and drive employment. In essence, we are exactly what the U.S. should want in a partner – someone who cares about its people, provides goods and services, and receives something in return for that.

We remain focused on underscoring that Bermuda is a vital economic player and a powerful and reliable partner to businesses around the world. I encourage our members and all Bermudians to share this message with your business partners, not just in the context of an election, but as part of our daily mission to promote the Bermuda brand for international business. ͻ

While the media in all parts of the world look to deﬁne and explain these issues in simple terms, it is nearly impossible to do with the pace of change, the complexity of the issues, the multiplicity of arguments, and the inter-connectedness of all of us.

It is in the spirit of making this very argument that Business Bermuda undertook its U.S. Economic Impact Study in 2010, and it is in that same vain that we have continued this research over the past two years looking even more broadly at what role we play in the U.S., Asia, and the rest of the World.

the goal of creating opportunities for proﬁt, employment, and growth. In a protracted period of slow economic stagnation and struggle in almost every corner of the world, uncertainty leads to escalating tensions between people – loosely deﬁned as the ‘haves’ and the ‘have nots’.

BUSINESS BERMUDA’S NEW ECONOMIC STUDY “BERMUDA IN THE WORLD ECONOMY: 2012”

CHARLES LUDOLPH TRANSNATIONAL ANALYTICS

On October 2nd 2012 in Hamilton, Bermuda, Business Bermuda released a major new study on the role of Bermuda in the world economy between 2004 and 2011. This is the first study that measures its economic significance and role in the global economy. The report is made even more significant by how Bermuda adapted under the ongoing economic crisis. The study takes a close look at Bermuda’s long-term trade and investment relations with ten of its biggest economic partners. The study provides detailed statistical analysis of Bermuda’s economic role with the United States, Europe and Asia, including the financial centers in China, the United Kingdom, Switzerland, and Singapore. The study also provides insights into the growing role that Bermuda provides for Ireland, the Netherlands, Germany, France, and Hong Kong.

Business Bermuda’s CEO and deputy chairman, Cheryl Packwood, noted that Bermuda’s reputation for economic stability and its deeply experienced financial sector is key to the size of its economic profile in the world economy. Particularly in times of economic challenges and financial volatility, Bermuda provides the world economy with an experienced investment and business environment that assures security. The study reveals that Bermuda ranks as one of the largest economic actors in the world economy. In 2010, its two-way trade with the rest of the world was $80 billion. In addition, Bermuda’s multinationals generated an additional $100 billion of direct sales in these ten large markets through its subsidiaries in the manufacturing and financial services sectors. In 2010, Bermuda’s holding companies provided $939 billion of inward and outward direct investment for the world economy. Bermuda’s businesses provided 600,000 jobs for the world economy. Bermuda’s largest economic partner remains the United States. Bermuda companies have a job-creating, direct investment position of $55 billion in the United States – more than the entire Caribbean, Singapore, and Hong Kong taken altogether. Bermuda is the 8th largest investor in the United States. Even as other leading U.S. economic partners pulled back from investing in the United States, Bermuda

expanded its role in America. Among other economic roles, the study shows that Bermuda provided ﬁnancial stability and additional liquidity during the recent economic crisis. Overall Bermuda’s bilateral business relations created 300,000 jobs in the United States. While Bermuda’s economic handprint is largest in the United States, its business relations are growing fastest with Asia. Trade with Mainland China, Hong Kong, and Singapore grew 200% between 2004 and 2011. Bermuda holds $20 billion of investment from China and Singapore – up from $1 billion in 2000. By the numbers, Singapore is Bermuda’s leading Asian economic partner driven by shipping and insurance sectors. Hong Kong SAR also stands out as it imports $1.4 billion a year in services from Bermuda. Bermuda is one of the top twenty economic partners with the European Union including $25 billion in two-way trade principally from insurance, ﬁnancial, and business services. Switzerland and the United Kingdom stand out as strong economic partners although their position with Bermuda decreased during the economic crisis. Ireland and the Netherlands share a special role with Bermuda in addition to the large relationship they share in trade in insurance services. These long time “Holding Company” jurisdictions domicile U.S. and EU multinational investment positions with Bermuda

totaling $430 billion. Bermuda is Ireland’s number one investment partner in the world. As a result, Bermuda exports $15 billion in business services to these two countries. The Business Bermuda study captures the four economic roles that Bermuda plays in the world economy. Bermuda’s financial sector and regulatory governance provide financial stability in a time of volatile global capital flows. Second, Bermuda is stepping up from its regional strength in providing a needed capital market for the United States in insurance and reinsurance and expanding into Asia and other markets. Bermuda is finding a new role as an investment domicile for Asia. And perhaps most important, Bermuda continues to support U.S. international business competitiveness with company law and regulation that meets the security needs of business but is responsive enough to lower costs in a tough international competitive environment. The full report can be found at www.businessbermuda.org. ͻ Business Bermuda CEO Cheryl Packwood with economist Charles Ludolph, President & CEO of Transnational Analytics (left), and Whit Clay, managing director of Sloane & Company.

PRIVATE EQUITY IN BERMUDA: SO MUCH MORE NEIL HENDERSON CONYERS DILL & PEARMAN

Inspired by Bermuda’s unofficial national anthem, “Bermuda Is Another World”, the Island’s Department of Tourism recently launched its new marketing slogan: “So Much More”. Bermuda’s offshore competitors in international finance might have once cynically suggested that this refers to the amount of time and cost required to establish an offshore vehicle in Bermuda, but actual experiences of sponsors and operators in recent years, particularly those in the private equity industry, have laid this notion firmly to rest. A report published in May this year by Ernst & Young revealed that senior executives of private equity firms are optimistic about the number of deal opportunities which will be available over the next year. For an industry that endured a difficult time in the early years of the global economic downturn, this expression of confidence, combined with the level of private equity deal activity seen so far in 2012, is a clear indication that the industry is on the path to recovery. The most successful private equity firms in recent years have been those which have been willing to explore opportunities, make use of innovative ways to finance and structure their deals, and identify new paths to growth. Innovation is naturally drawn to a commercially flexible and responsive environment and private equity promoters have found that offshore jurisdictions offer the best fit for this approach, with Bermuda now well established as a top-shelf offshore domicile of choice. Long associated with the insurance, asset finance, and mutual fund industries, observers with an eye on offshore developments will have noticed that Bermuda is increasingly chosen as the domicile for the full range of offshore entities, amongst which is a burgeoning portfolio of private equity vehicles. By introducing two central features of the jurisdiction - product and infrastructure - this article will provide an insight into why promoters who have in the past journeyed to other offshore jurisdictions to establish their investment vehicles are more likely now to take the shorter trip to Bermuda for their offshore requirements.

First, let’s look at the product. Private equity vehicles established in Bermuda usually take the form of limited partnerships or exempted limited companies, although they may also be structured as unit trusts mostly favoured by the Asian investment market. A Bermuda company is a separate legal entity distinct from its members and may be incorporated within 24 hours with the capacity, rights, powers, and privileges of a natural person. A private equity fund organised as a closed-ended mutual fund company may also be registered as a segregated account company in order to ring-fence the assets and liabilities attributed to a particular segregated account from the assets and liabilities attributed to other segregated accounts of the company. Having this option available in Bermuda allows promoters to achieve legal segregation of assets and liabilities without needing to incorporate a separate company for the purpose, thus avoiding the additional costs and administrative burden involved with establishing and operating multiple legal entities. The limited partnership, which may also be established within a few business days, continues to be the most popular vehicle for private equity structures. This is primarily due to its ﬁscal transparency and also because it is generally subject to a lesser degree of regulation than a company. Closedended private equity funds (either companies or limited partnerships) are excluded from the Investment Funds Act 2006 of Bermuda (the “IFA”) and are therefore not regulated by the Bermuda Monetary Authority. If open-ended mutual fund companies have less than 20 participants, and do not advertise their offer to the public, they are also deemed private and are excluded from the IFA. Bermuda’s partnership legislation does not attempt to regulate the affairs of a limited partnership to a great extent with the effect that the operation of the partnership is primarily left to agreement between the partners. The legislation has also been amended over the last few years to ensure that it remains “industry friendly” as a structure suitable for private equity funds.

having to novate contracts upon a change of partners. This Competing jurisdictions would claim that Bermuda is slower has been well-received by promoters of limited partnership and more costly than its competitors. Comparative analysis vehicles that are party to ISDA contracts and have loan shows this to be incorrect. The time it takes to establish a facilities secured by the right to call limited partnership private equity structure, as well as the set up and ongoing capital. In competing jurisdictions with limited partnerships maintenance costs involved, are now directly comparable with, without separate legal personality, issues arise when applying or less than, those of equivalent structures in other leading the insolvency set-off principles due to the requirement for offshore jurisdictions, many of which have seen an increase in mutuality in relation to debits and credits to be set-off. The fees in recent years. mutuality requirement will be affected by changes in respect The second central feature is “Bermuda’s partnership legislation of partners of the partnership the Island’s infrastructure. does not attempt to regulate the established in these jurisdictions Bermuda enjoys a sophisticated as a result of admissions or telecommunications system, an affairs of a limited partnership to withdrawals or by operation abundance of professional service a great extent with the effect that of law as a consequence of the providers, as well as economic and dissolution, bankruptcy or death political stability. There are in excess the operation of the partnership is of a partner. of 450 lawyers currently admitted to primarily left to agreement between the Bermuda Bar, a number of who In addition, the election to specialise in structuring private the partners. The legislation has also have separate legal personality equity funds and are adept at working been amended over the last few years ensures that the members of closely with their counterparts in to ensure that it remains “industry the partnership avoid potential the major financial centres in North exposure arising in certain America, Europe, and the Far East. friendly” as a structure suitable for common law jurisdictions as The ‘Big Four’ accounting firms have private equity funds.” a result of the application of been established in Bermuda for over conflict of laws principles. Where 40 years, and there are an increasing the partnership has not elected number of fund administrators with to have separate legal personality under the laws of its the expertise and experience to service the valuation and onjurisdiction of establishment, the law of the jurisdiction in going administrative requirements of private equity funds. In which the partnership carries out its business is more likely addition, the Bermuda Stock Exchange is now a leading, fully to treat the partnership as merely a contractual relationship electronic, offshore securities exchange that specialises in the between the partners rather than an entity in its own right. listing and trading of capital market instruments. Also, there This can have unintended and undesirable consequences for are a number of international banks located on the Island, so the liability of its limited partners. By establishing a Bermuda credible alternatives exist on the Island in relation to raising limited partnership and electing to have separate legal debt and capital financing. personality, the limited partners can ensure that their limited liability will not be compromised in this way.

One option that private equity promoters have found particularly attractive with a Bermuda limited partnership is that, as with a limited partnership established in Delaware, a Bermuda partnership may elect to have separate legal personality. This election puts to rest any uncertainty that the partnership continues to exist regardless of whether all the partners die or are declared bankrupt, or there is a change in the constitution of the partnership. The option of electing to have separate legal personality is also advantageous where a partnership has entered into loan facility arrangements and has granted security; any change of limited partners will not affect the arrangements and avoids the requirement of

Private equity houses interested in maintaining a physical presence on the Island have found that, in recent years, work permit restrictions are more relaxed for their key management employees and that the costs of employing staff and occupying premises in Bermuda are falling to levels comparable with competing jurisdictions. In addition, for those that do decide to take up residence on the Island, Bermuda offers a good stock of desirable yet increasingly affordable houses and apartments suitable to rent or buy, all within an easy commute to its capital, Hamilton, as well as a selection of high quality schools. Bermuda also enjoys tax neutrality – there is no income or proﬁts tax, withholding tax, capital gains tax, capital transfer tax, estate duty, or inheritance tax payable by a Bermuda company or its shareholders other than shareholders ordinarily resident in Bermuda. In addition to the tax beneﬁts, promoters recognise that the jurisdiction provides a robust regulatory, anti-money laundering, and tax information exchange and double tax treaty network regime whilst enabling promoters to manage investment strategies and objectives without the restrictions and reporting requirements imposed by onshore regulators. Furthermore, Bermuda is

not subject to the increasingly onerous onshore regulatory environment exemplified by the Alternative Investment Fund Managers Directive to be introduced in the UK and other European Community member states from 2013. As well as Bermuda’s regulatory and infrastructure advantages, the Island enjoys a proximity to the major international centres of commerce which is geographically unique. Located in a time zone one hour ahead of New York and Toronto and four hours behind London, Bermuda provides easy access to major airports in Europe and North America, being less than two hours flight time from many U.S. gateway cities and around seven hours from London. Bermuda’s enduring relationship with international business, its progressive regulatory environment and the government’s appetite to maintain the jurisdiction as an efficient place to do business have combined to make the jurisdiction an offshore domicile of choice for private equity business. For offshore private equity promoters, just as for those who come to the Island for a vacation, Bermuda does indeed offer so much more. ͻ

ISLAMIC FINANCE IN BERMUDA: AT HOME AND ABROAD AN INTERVIEW WITH MUHAMMAD KHAN MUHAMMAD KHAN DELOITTE

Muhammad Khan started his career with Deloitte Bermuda as an Audit Senior in January 2001 with a working experience of over four years with Deloitte Pakistan. Over the years, he rose through the corporate hierarchy to become a current Principal at Deloitte serving alternative investment and (re)insurance clients with current focus on Islamic Finance and various Islamic Products. Muhammad is a fellow member of the Institute of Chartered Accountants of Pakistan where he secured a gold medal for outstanding performance in ﬁnancial reporting. He is also a CPA and now aiming toward a Doctorate in Islamic Banking and Takaful. Muhammad is married to Samina, a doctor by profession but now playing the important role of housewife by raising three children: eight-year-old Unaysah, Numair age six, and Hasan who just turned one.

a summing-up of all that has gone before was revealed to the last prophet in the chain of prophethood, Muhammad (peace be upon him) through the Angel Gabriel. The Qur’an is the unaltered record of the exact words revealed by Allah to the Prophet Muhammad (peace be upon him). It deals with all the subjects that concern us as human beings: wisdom, doctrine, worship, economics, and law. At the same time, it provides guidelines for a just society, proper human conduct, and an equitable economic system including Islamic Finance. The Sunnah, the practice and example of the Prophet Muhammad (peace be upon him) is the second source of Shariah for Muslims. A Hadith (a subset of Sunnah) is a reliably transmitted report of what the Prophet said, did, or approved. From the Qur’an and the Sunnah the principles governing Islamic Finance include: s

The prohibition of taking or receiving interest at exorbitant rates (Riba), but this does not preclude a rate of return on investment which is agreed from the beginning of the transaction by both contracting parties. In most cases, the references to interest YH[LZ I` 0ZSHTPJ ÄUHUJPHS PUZ[P[\[PVUZ HYL [V OLSW ILUJOTHYR [OL YL[\YU VU PU]LZ[TLU[ [V VɈLY [YHUZWHYLUJ` ;OPZ KVLZ UV[ PTWS` interest is being used in the transaction.

Business Bermuda sat down with Muhammad to talk about Islamic Finance, Bermuda, and his vision for Bermuda as an Islamic Financial Center.

Risk in any transaction must be shared so that the provider of capital and the entrepreneur share the business risk in return MVY H ZOHYL PU WYVÄ[

BUSINESS BERMUDA: Thank you for talking to us. It might be good to explain what Islamic Finance is and what differentiates it from other forms of ﬁnancial products?

The prohibition of speculative behavior (Gharar), meaning gambling (Maysir) and extreme uncertainty or risk, is prohibited.

Non-compliant investments constitute investments in businesses related to unlawful (Haram) products, interest IHZLK ÄUHUJPHS ZLY]PJLZ LU[LY[HPUTLU[ NHTISPUN HUK JHZPUVZ pornography, and weapons among other things.

MUHAMMAD: To understand what Islamic Finance is, one must understand, ‘What constitutes Islamic Law (Shariah)?’ Shariah law is primarily based upon the Qur’an and the Sunnah. The Arabic word ‘Islam’ simply means ‘submission’ and derives from an Arabic word meaning ‘peace’. In a religious context it means complete submission to the will of Allah. The followers of Islam are called ‘Muslims’. Muslims believe in One Unique, Incomparable God, in the prophets through whom His revelations were brought to mankind, in the Day of Judgment, individual accountability for actions, in God’s complete authority over human destiny, and in life after death. Therefore, Muslims believe that there is no one worthy of worship except Allah. The Prophets of Christianity and Judaism are indeed the Prophets of Islam starting with Adam to Jesus, peace be upon them. However Muslims believe that God’s ﬁnal message to man, a reconﬁrmation of the eternal message, and

Typically, an Islamic Finance product would not guarantee a ﬁxed rate of return without sharing entrepreneurial risk and would be backed by assets of inherent value.

BUSINESS BERMUDA: You have had some 15 years experience as an auditor and practitioner in Islamic countries and Islamic ﬁnance in Bermuda. Please describe your experience as it relates to Bermuda’s role as a center for Islamic Finance. MUHAMMAD: Since I ﬁrst came to Bermuda, the interest and appetite for Islamic Finance in Bermuda has grown

signiﬁcantly, especially as a result of recent laudable efforts by Business Bermuda promoting Bermuda in the Gulf Cooperation Council (GCC) and issuance of guidance notes on Islamic Collective Investment Schemes by the Bermuda Monetary Authority (BMA). All this has paved the way to welcome Islamic Finance. On the other hand, there is a growing demand from investors in the West for Islamic alternative investment products over traditional Islamic investments such as equities and real estate. There is also an increasing demand from certain institutions, in the GCC, and South East Asian regions, for ‘Shariah-compliant’ investment products.

BUSINESS BERMUDA: Is Bermuda well positioned to provide a level of excellence in service for the Islamic community?

MUHAMMAD: Yes, Bermuda is already a well-known international finance center. Although markets like Malaysia and London have already established themselves for Islamic finance, the Bermuda Government is moving fast to make the Island an attractive jurisdiction for Islamic Finance. Bermuda offers a regulatory framework that meets international standards and ensures high ethical standards, fostering a business-friendly environment. Bermuda has over 30 Tax Information Exchange Agreements and is recognized for its efforts to gain a coveted spot on the OECD’s ‘white list’, which is largely due to its effective regulatory environment – monitored by the BMA. As more innovative and complex Islamic financial products are re developed, Bermuda’s status as ‘Tax Neutral’ jurisdiction offers effective tax structuring, which is a competitive advantage over its onshore competitors. This tax neutrality, combined with a robust regulatory framework, means faster adoption of innovative measures in the marketplace without the heavy burden and delays that can be found in other locations. Talent is another competitive advantage. Bermuda has a high concentration of intellectual capital and is rapidly developing the capability and know-how in Shariah-compliant funds, wealth management, and Retakaful products. An example being the recent formation of a dedicated Islamic Finance team at Deloitte Bermuda, which I lead covering advisory and assurance services with available leverage from the global network of Deloitte’s experts in Islamic Finance including a Shariah Scholar. In addition, the Island has a modern and sound infrastructure, including transportation, information technology and communication, as well as other professional services to support the financial industry.

BUSINESS BERMUDA: As a practicing Muslim, living and working in Bermuda, have you found a strong, supportive community here for you and your family?

MUHAMMAD: There are around 600 Muslims in Bermuda (population approximately 65,000) with the majority of them being locally-born Bermudians. There are three mosques located in east, west, and central parishes and a Muslim school. Although small in size, we ﬁnd the Muslim community to be a well-connected, supportive, active, and participative community. Mosques in Bermuda include community centers running various programs, activities and events for all ages throughout the year, along with Friday congregation and ﬁve daily prayers. There are two annual Islamic festivities: Eid ul Fitr and Eid ul Adha. For Eid, almost all the community gathers to together for a full day of fun and festivities either at mosques or outside at a park or beach. Both o our children go to the Muslim school which of exceeded e our expectations in terms of sincerity and diligence of teachers as well as academic excellence. d Halal food is easily available, and a number of restaurants also offer limited Halal items on their menu. Moreover, new Muslim restaurants and businesses are being successfully introduced. In short, Bermuda, with its peaceful island life and openhearted people, is a wonderful place for expatriate Muslims, like us, to peacefully practice our faith and work in harmony with others to help Bermuda grow.

we had already experienced and appreciated when we left Bermuda. The Muslim community and schooling facility was another significant comforting factor because it provided the required social networking and support. Deloitte member firms are recognized as employers of choice with numerous awards and recognitions around the globe, and, after leaving Deloitte for the first time, I realized Deloitte truly offers unmatched professional development and growth.

BUSINESS BERMUDA: In the future, what do you perceive will be Bermuda’s role in the Islamic community, both on business and personal levels?

MUHAMMAD: From a business point of view I would expect signiﬁcant growth in three areas: s

Shariah-compliant funds and structured products: As one of the world’s leading jurisdictions for asset management, Bermuda provides a favorable environment for the establishment of Shariah-compliant funds and structured products.

Shariah-compliant trusts or other specialized asset management vehicles, for High Net Worth Individuals (HNWIs): This type of niche product can help attract HNWIs who are seeking to hold their assets in a stable jurisdiction that has a OPNO SL]LS VM WYV[LJ[PVU HUK JVUÄKLU[PHSP[`

Takaful/Retakaful (the name for Islamic-compliant insurance/ reinsurance) can be translated as ‘shared responsibility’: A

common example would be a reinsurance pool arrangement with certain other Shariah based characteristics. The Insurance (J[ HUK V[OLY YLN\SH[PVUZ WYV]PKL ZPNUPÄJHU[ ÅL_PIPSP[` ^P[O respect to corporate structures and governance, which allows MVY [OL LɉJPLU[ LZ[HISPZOTLU[ VM YL[HRHM\S HUK JHW[P]L takaful arrangements. Bermuda’s proven reputation as a balanced regulatory jurisdiction with tax neutrality, close proximity to key global markets, availability of in-depth human capital and more importantly its commitment toward Islamic Finance has already been acknowledged by the global players. It is now just a matter of time before Bermuda will grow exponentially as an offshore hub for Islamic Finance here in the West. Indeed, recognition has already been attributed to the jurisdiction with awards given this year to Business Bermuda and the jurisdiction as a result of its considerable efforts. I have also noticed that the international press has already labeled Bermuda as an Islamic Finance center. From a personal point of view, I feel that the Muslim community, although it has strong inner-bonds, is still in its establishment phase. I believe that with Islamic Finance, the awareness of Islamic belief and practices will become more common ultimately helping the local Muslim community. I also expect that the development of the Islamic Finance industry and Muslim community will beneﬁt Bermuda and the local Muslim community with new job and investment opportunities. ͻ

BUSINESS BERMUDA: After

Students enjoy various activities at ‘Clara Mohammed School’ Cedar Avenue

previously living in Bermuda, then leaving, what made you decide to move back to Bermuda and why?

MUHAMMAD: After being here for almost six years, I decided to move with my family to Riyadh, Kingdom of Saudi Arabia (KSA), where I undertook the responsibilities of the Director of Internal Audit in a large healthcare group with operations in the Kingdom and the United Arab Emirates. It was an excellent experience for us. At the completion of my contract in the Kingdom, I had the choice to return to Bermuda with Deloitte or to renew the contract in KSA. Bermuda’s unique balance of professional and social life as well as my experience with Deloitte Bermuda made it our natural choice once again. Professionally, Bermuda offers a world-class financial services industry experience and benefits coupled with the subtropical weather, a range of outdoor activities, low commuting time, political and financial stability, and amazingly welcoming and wonderful people. These convivial aspects were something

Bermuda’s Muslim community celebrating Eid ul Fitr on August 20, 2012 at Willow Bank

THE RISE OF THE INSURANCE LINKED SECURITIES MARKET

INTERNATIONAL CALENDAR OF EVENTS NOVEMBER 2012 November 29 [New York, USA] Bermuda Financial Services Conference

DECEMBER 2012 December 6 [Manama, Bahrain] Bahrain Bankers Association Breakfast

December 9 -11 [Manama, Bahrain] World Islamic Banking Conference: Bahrain

JOHN WHILEY PRIME MANAGEMENT LIMITED

The perfect storm of tepid global growth, volatile markets, and historically low interest rates has pension funds and other institutional investors desperately searching for a way to generate meaningful returns. More and more of these investors are turning to Insurance Linked Securities (‘ILS’) as a potential solution. ILS are securities or contracts which provide a rate of return depending upon the non-occurrence of deﬁned catastrophic events such as hurricanes or earthquakes. Typical ILS include Catastrophe Bonds (Cat Bonds) or a portfolio of collateralised reinsurance contracts. The ILS market provides (re)insurers with an additional risk-transfer mechanism, investment managers with an additional service offering to grow assets, and investors with a compelling alternative investment proposition uncorrelated to the markets, interest rates, or the global economy. Home to several of the world’s largest reinsurers, Bermuda boasts a long investment fund history. As a result, the island is ideally suited as a jurisdiction in which to establish and service an investment fund devoted to investing in ILS. However, despite its attractiveness, this asset class also comes with its own challenges. Matching fund liquidity to the investment cycle of the underlying ILS portfolio is difﬁcult, particularly if a catastrophic event occurs which

December 9 [Manama, Bahrain] results in the impairment of a portfolio asset. Traditional fund mechanisms for restricting liquidity, such as lock-up periods and gates, generally do not work well in the ILS fund context. This has given rise to innovative solutions, such as the ‘slow pay’ redemption provisions, which are better suited to the asset class and provide investors with more certainty. Side pockets can also be used to effectively segregate impaired assets from the main portfolio to ensure that new investors do not participate in any previously impaired assets. However, their use does raise other issues, namely their impact upon performance fees. Several options have been devised in order to strike the appropriate balance between the interests of investors and managers. Analysing each and choosing the most appropriate method for the particular type of fund is an important element of fund structuring.

Bahrain Bermuda Financial Services Reception

December 13 [Dubai, UAE] Dubai Bermuda Financial Services Reception

APRIL 2013 April 10 [London, UK] London Financial Services Conference

The key to successfully navigating such challenges is to engage experienced service providers who are not only well-versed in the speciﬁc nuances of the asset class but can add real value when structuring the fund vehicle. Fund managers who want to make a good ﬁrst impression with investors need to have thoughtfully considered the various options in the fund design and be able to articulate why a particular option represents the best investment alternative. Prime Management is a Bermuda-based hedge fund administrator which has been servicing the specialised requirements of investment structures, sponsors, and managers in the ILS market since 2002. Prime’s ILS Team is a dedicated, specialized service team comprised of professionals exclusively focused on the evolving requirements of the industry with the requisite expertise and training to service the most sophisticated portfolios of ILS. Prime welcomes the continued growth and maturation of the ILS industry and looks forward to providing innovative solutions to the unique challenges posed by the ILS asset class. ͻ

AFRICA RISING: EXPERTLY NAVIGATING AFRICA’S GROWING FUND MARKET

LOCAL CALENDAR OF EVENTS BUSINESS BERMUDA LUNCH ‘N’ LEARN SERIES 2012 November 8 [Conyers, Richmond House, 2nd Floor] Islamic Finance: What is it? Why is it Important to Bermuda?

December 6 [Conyers, Richmond House, 2nd Floor] Financial Planning: Creating and Living by a Sensible Budget

2013 January 17 [Conyers, Richmond House, 2nd Floor] Bermuda’s Economy: What’s Next?

February 7 [Conyers, Richmond House, 2nd Floor] The Beneﬁts of Entrepreneurship

February 20 [Fairmont Hamilton Princess, Hamilton] Business Bermuda Annual General Meeting

March (TBA) [Conyers, Richmond House, 2nd Floor]

STUART LACEY ALTREE CUSTODY SERVICES LTD.

Across the industry people are increasingly looking to African markets especially given the global economic downturn in all the other major world markets. Entering the African market now, a fund manager has the opportunity to capitalise on many beneﬁts. There is a huge potential upside in Africa with a younger population that is now mobile phone and internet savvy, signiﬁcant untapped agricultural and water resources, and colossal growth in energy and commodities. It is still early, so investors going in now can build positions and establish a track record, which is important in advance of the larger wave of capital that is expected in the coming years.

The Biggest Driver of your Investment Portfolio Africa, by its very nature and compared to other markets, is a very different market. It is tough to enter the various markets on the continent at the same time due to the myriad currencies, languages, regulatory environments, documentation standards, and banking requirements. Right now, consolidated services – with financial groups that set up one time, with one set of documents, with one KYC package via one relationship, and that can access diversified services on a pan-African basis – is one of the smartest ways to enter the African market. In order to meet this need, Altree Group has built a consolidated service with brokerage, custody, FX, research, and investment banking all working together via one efficient platform.

investing requires particular attention given to foreign exchange as the current spreads can be vast. It is important to find partners in custody and banking who have a very transparent FX pricing model and can offer wholesale pricing. Doing your due diligence is essential as the large Global Custodians who rely on hub and spoke models are typically too expensive and just do not know the local market requirements or players. Investors should look for a pan-African specialty custodian or bank to cut out the middlemen and manage any challenges via their longstanding relationships with local brokers and market infrastructures. Getting away from the more common countries in Africa, many people are looking to Mauritius now as the new offshore domicile for Africa. It is a very compelling story, and that is why Altree just expanded Mauritius operations this year. The big story is probably Nigeria in the first wave, followed by Ghana, with Kenya, and also East Africa. Also, North Africa is not to be left out of consideration, but obviously there are still socio-political challenges, making it important to pay attention to the region with a mid to long term mind set. Regulation is making life quite tough in the U.S. and European markets as opposed to what is happening in the African markets. Securities market infrastructures (SMIs) are undeveloped in many African countries but are rapidly improving. The African Development Bank and a group called Africlear are doing significant work to really enhance the services and systems of SMIs across the continent. The standardisation of procedures (SWIFT, IOSCO, ISO, etc) at SMIs is vital if these markets want to run at global standards, and they are being rapidly put in place. This is resulting in a significant change to accessibility and liquidity. African markets, which had no legacy systems, are now buying the best systems on the planet and deploying them very rapidly. What this all means, is that it is soon becoming Africa’s time to shine. ͻ

People who have yet to set up a fund, but are looking to get advice on the early stages of how to get into the market, are increasingly coming to Altree for structuring advice. Because we have structured hundreds of funds and understand the African market well, we give guidance about what structures to use, what service providers are best, and how to beneﬁt from various jurisdictions in terms of tax and regulation. This process can save investors time and money because Africa can be a very time consuming and expensive place if you are not sure of what you are doing. Investing in Africa has certain inherent risks that any fund manager doing business on the continent should take into consideration. With all the different currencies, pan-African

BERMUDA – EFFICIENT CAPITAL MOVEMENT RANDALL KREBS MERTIUS TRUST COMPANY LIMTIED

There have been many studies done to show that International Financial Centers facilitate an efficient flow of capital. IFCs provide this service better than other jurisdictions, which is why IFCs continue to flourish today. Due to the increasing demand for capital by BRIC and other emerging countries, statistics are showing that IFCs are filling a key role in the development of the economies of the emerging markets. This is not a surprising development. It is only necessary to look at the history of IFCs to realize that they have developed for exactly this purpose, a role that they have been performing for many, many years. In Bermuda, we have had traditional trusts established for various purposes since the early 1900s. Bermuda’s location between England and North America (the emerging market of the day) made it an ideal location for families with business ventures that straddled the Atlantic. These early Bermuda trusts were created for many reasons including as a platform for investing into North America, to deal with succession of wealth generated in the United States and Canada, and to diversify the risk of hold assets in a single currency or country. The World Wars reinforced the wisdom of diversification. Historically, governments have introduced taxes to finance wars. Many countries introduced ‘temporary’ income taxes during the World Wars . At the time it was universally accepted that tax payers had the right to organize their affairs to minimize the amount of taxes and that one country would not assist another in the collection or enforcement of its tax laws. Entrepreneurs and investors quickly realized that use of a tax neutral jurisdiction as a platform for investment would result in more capital available to support their capital hungry and growing businesses. Throughout the mid-1900s technology made international business and the flow of capital easier. International communication, transportation, and currency transactions became easier and more common. Many countries were rebuilding after the wars or utilizing the increased mobility of capital and technology to develop their economies.

Unfortunately, developing economies typically suffer from inefﬁcient institutions. Local entrepreneurs are unable to locally access the capital they require quickly or at a competitive price. Table 1 shows that this continues today - the quality of institutions in developing countries is signiﬁcantly lower than in the developed countries.

TABLE 1: QUALITY OF INSTITUTIONS – DEVELOPED VS. DEVELOPING COUNTRIES Country

Quality of Institutions

DEVELOPED COUNTRIES United States 0.980 United Kingdom 0.934 West Germany 0.959 Japan 0.937 Canada 0.967 DEVELOPING COUNTRIES Brazil 0.636 India 0.576 China 0.569 INTERNATIONAL FINANCIAL CENTERS Hong Kong 0.802 Singapore 0.856 Switzerland 0.998

Source: Norway. 2009. Tax Havens and Development: Status, Analyses and Measures. Report from the Government Commission on Capital Flight from Poor Countries, Oslo.

Institutional Quality Table 1 is an index based on data from Political Risk Services. The index consists of an un-weighted average of ﬁve part-indices: i. ii. iii. iv. v.

the degree to which the population of a country accept its law-enforcement institutions, bureaucratic quality, corruption in government, risk of expropriation and probability that government will honour contractual obligations.

The index goes from zero to one, with zero as the worst institutional quality and one as the best. Table 1 compares the quality of institutions in developed, developing, and international financial jurisdictions. It is to be noted that the quality of the institutions in developing countries is significantly lower than in the developed countries and international financial centers. Entrepreneurs and investors demand: (i) ways to diversify risk; (ii) reduction of transaction friction (red-tape/fees/taxes) ; and (iii) elegant and responsive tools to facilitate the flow of capital. Economics 101 teaches us that where there is demand,

the market will seek to supply. The IFCs respond to the demand by introducing responsive tools that supply capital, reduce transaction friction, and diversify risk.

BERMUDA’S RESPONSE Bermuda has responded to the demand with the introduction and supply of a number of ‘products’. Some are unique to a specific industry or address a specific need (e.g. financing of Russian aircraft purchases). Others are more universal in their application (e.g. insurance and funds). The following are only a few of the ‘products’ that have been developed to meet international demand for capital, risk minimization, and reduced friction.

known for the Mandarin Hotel chain, financial services, and more. Jardines has experienced the financial impact of war and government expropriation enduring a significant loss of business assets in WWII and as a result of nationalization by Communist China following the war. In 1984, in anticipation of the handover of Hong Kong to China in 1997, Jardine Matheson incorporated a Bermuda company to hold its business empire as a mechanism to reduce the risks of the uncertain business environment in Hong Kong. It expressed the view that the Bermuda holding company reduced its exposure in Hong Kong/China from 72 percent of total assets to a planned 50 percent. Other Hong Kong companies followed suit.

INSURANCE: The Bermuda insurance market began in 1947 when C.V. Starr chose Bermuda as the headquarters for his American International Company. Insurance development accelerated during the 1960s with the introduction of captive insurance, an innovative risk ﬁnancing solution for corporations. By 1980, Bermuda was by far the world’s leading captive domicile as it is today. Beginning in the mid-1980s, Bermuda began to play a broader role in the world’s insurance and reinsurance markets in response to the mid-1980s commercial liability insurance crisis in the United States. Bermuda has become one of the world’s top three jurisdictions in the global reinsurance market. Bermuda has achieved this success by developing a regulatory system which involves lower regulatory burden in comparison with traditional jurisdictions such as the U.S. and the U.K. New companies can be formed in a matter of a few weeks in Bermuda, encountering much less regulatory bureaucracy and red-tape than in other jurisdictions.

IFCS AS CONDUITS FOR INVESTMENT: Emerging economies have significant capital requirements. It can be shown that a country’s economic growth is directly related to the amount of foreign direct investment (“FDI”). Professor Jason Sharman argues that IFCs have supplied the demand for capital by providing efficient institutions and minimizing the transactional friction on capital transactions. IFCs have developed efficient, timely, risk sensitive, flexible, and lower cost ‘products’ designed to meet the demand for capital for these emerging economies.

TABLE 2: FOREIGN DIRECT INVESTMENT BRIC & BVI FOR 1980 & 2011 1980 COUNTRY

Brazil Russia India China BVI

Insurance companies require signiﬁcant capitalization, which typically comes from developed economies. Bermuda has been an innovator in raising new capital with new vehicles such as sidecars and collateralized reinsurance structures. The overall result is the creation of better and cheaper insurance – insurance which is affordable and in some cases designed for the emerging jurisdictions. A loss or regional catastrophe in a developing country effectively results in a capital ﬂow from developed to developing countries to rebuild their infrastructure and business resources.

The answer is simple, risk minimization. In 1832, Scotsmen William Jardine and James Matheson formed Jardine Matheson, a trading company based in China. Jardine Matheson was instrumental in creating trade with China and the development of Hong Kong. Today the company is

17,480 n/a 452 1,074 1

38,545 n/a 78 Not avail 0

2011 INBOUND

OUTBOUND

669,670 457,474 204,692 711,802 288,987

164,523 362,101 111,257 365,981 280,244

Foreign Direct Investment expressed in millions of U.S. dollars at current prices and current exchange. Source: United Nations Conference on Trade and Development. Table 2 demonstrates:

OFFSHORE COMPANIES: Why are there more Bermuda companies on the Hong Kong stock exchange than any other country?

2011

1980 INBOUND OUTBOUND

the signiﬁcant increase in inbound FDI from 1980 to 2011. This FDI has been used to fuel the growth of the BRIC economies; during the same period BVI experienced a similar substantial growth in inbound FDI – for 2011 FDI represents over $12 million per person. Unlike the BRIC countries, BVI’s inbound and outbound FDI in 2011 are almost identical, indicating that BVI is aconduit for investment capital

Table 3 illustrates that the preferred source of FDI for China is via IFCs, with Hong Kong, BVI, Singapore, Cayman, Samoa, and Mauritius ranking in the Top Ten sources of FDI, most ahead of the U.S. which ranked 7th.

TABLE 3: TOP TEN SOURCES OF FOREIGN DIRECT INVESTMENT TO CHINA IN 2008 SOURCE HONG KONG BVI SINGAPORE JAPAN CAYMAN ISLANDS SOUTH KOREA UNITED STATES SAMOA TAIWAN MAURITIUS

$US BILLIONS 41 16 4.4 3.7 3.2 3.1 2.9 2.6 1.9 1.5

Source: U.S.-China Business Council, Foreign Investment in China (2009). While China is the most dramatic success story, similar results can be shown in other BRIC and emerging economies. UNCTAD estimates that IFCs’ contribution to inward FDI can be as high as 30 percent for certain Latin American countries (Brazil and Chile), Asian economies (Hong Kong, China), and the Russian Federation. It has been estimated that no less than 38% of direct investment to India in 2006-08 came from Mauritius. While Cayman is the clear leader in offshore funds, Table 4 shows that Bermuda is also a signiﬁcant source of FDI from the Latin American and Caribbean regions, being the only IFC in the top 5 countries.

TABLE 4: TOP 5 SOURCE COUNTRIES FROM LATAM AND CARIBBEAN IN 2011 COUNTRY BRAZIL MEXICO CHILE BERMUDA ARGENTINA

NUMBER OF PROJECTS 81 42 37 35 22

Source: The fDI Report 2012

TRUSTS: SUCCESSION, MANAGEMENT, RISK MINIMIZATION: The emerging economies are developing new millionaires and billionaires at a staggering rate. The newly wealthy are

aware of the potential impact of corruption and arbitrary rule change on their ability to protect their wealth. Many are ﬁrst generation wealth and need to also give consideration to succession of their businesses/wealth and management of their investible assets. Experience shows that, regardless of origin, successful entrepreneurs and wealthy individuals have common concerns, including: s s s s s s s

family harmony; planning for succession of business control and wealth; preservation of the family’s assets as the family grows and separates (physically and philosophically); instilling the family’s core values/philosophy in future generations; providing for the needs of descendants (without damaging their drive and personal development); protecting the privacy of the family; and how to ‘give back’ to society – charity/philanthropy

Bermuda has been working with families for decades to develop structures and mechanisms to address these concerns. One of the most ﬂexible and useful tools is the trust. Bermuda (like other IFCs) have supplemented traditional trust law to make it more ideally suited for addressing the concerns of its clients.

WHAT ARE TRUSTS USED FOR? Succession Planning – Successful entrepreneurs are concerned with succession of business control and succession of wealth. Unfortunately, entrepreneurs often have a hard time actually putting succession plans in place. Experience shows that failure to implement a succession plan often leads to disputes/ litigation and often the destruction of a business empire and family harmony.

There are many structures that are used in Bermuda that can preserve control during the entrepreneur’s life and provide for a smooth succession upon his death or retirement. For example, a simple structure would involve the creation of the family’s very own trustee company, which would administer a trust formed for the benefit of the entrepreneur during his life and then a predefined division of the wealth after his death. The creation of a private trustee company is actually very common and usually inexpensive. Since this would be the entrepreneur’s own trustee company, the entrepreneur and his trusted advisors could control the trustee, thereby controlling any underlying operating companies and investable assets. More elegant structures, such as family offices, are designed to promote family harmony/unity, instil the family philosophy in future generations, and to train/educate descendants on how to successfully manage the family business and wealth.

In addition, the trust documentation can include provisions designed to stop descendants from challenging the structure. A common clause is called a ‘no contest clause’ which would provide that any descendant challenging the structure or commencing legal proceedings would automatically lose all right to receive an ‘inheritance’. Divorce & Forced Heirship – Laws of many countries dictate how assets are to be divided upon the divorce or the death of the wealthy entrepreneur. One of the advantages of placing assets in a Bermuda trust is that the trustee has legal title to the assets, and the assets are no longer owned by the entrepreneur and might not be included in the calculation of assets to be divided. Even if the foreign court treats the assets as belonging to the entrepreneur, Bermuda has enacted laws that prevent Bermuda courts from using trust assets to satisfy judgements of foreign courts in divorce, forced heirship, or bankruptcy proceedings. Privacy – Public battles are all too common among wealthy families. The publicity is not only embarrassing but bad for business.

Many high net worth individuals are concerned about the disclosure of information regarding their families, their assets, and their activities. Journalists search company and court records to get information for their articles. Bermuda has a tradition of protecting the privacy of individuals involved in legal proceedings. Cases involving trust disputes are almost never reported, and it is standard practice to seek a ban on publication. In addition, trust structures also protect against public disclosure of ownership information for assets. Bermudian trusts are not registered. There is no publicly available information regarding trusts, settlors, or the beneﬁciaries. Also, when trust assets need to be registered (e.g. shares of a company), the trustee is shown as the legal owner. Many entrepreneurs ﬁnd this additional layer of privacy helpful in business dealings or when they are concerned about threats, such expropriation or kidnapping.

CONCLUDING WORDS: Studies have shown that IFCs ﬁll a valuable role in the transfer of capital and the development of emerging economies. Bermuda has pioneered the development of a number of ‘tools’ or ‘products’ that meet international demand for capital, risk minimization, and reduced friction. Bermuda remains well positioned to provide ﬁnancial services to businesses, entrepreneurs, and investors in emerging economies. ͻ

ISLAND HOPPING ON THE HONG KONG STOCK EXCHANGE

JUDY LEE APPLEBY

Your trusted business advisor.

Bermuda has a long-established reputation for facilitating the business and investment needs of global clients. At Deloitte, our experienced team can introduce you to the market, assist you in navigating regulatory requirements and provide you with the intellectual capital to beneﬁt your business and put you ahead of your competitors. Welcome to our business friendly environment. Visit www.deloitte.bm

Bermuda is a leading offshore ﬁnancial centre, with a sterling reputation. There are currently over 660 Bermuda companies listed on major international stock exchanges around the PAUL CHEUK world including the Hong APPLEBY Kong Stock Exchange (“HKSE”), London Stock Exchange, NYSE, NASDAQ, and Singapore Exchange. Bermuda has a long-standing reputation and is one of the two earliest offshore jurisdictions accepted for listing on the HKSE. Hundreds of Bermuda companies have been listed on HKSE since the 1980s resulting in nearly 500 Bermuda companies and constituting 32% of the total number of companies listed on the HKSE today.

domicile to Bermuda, which were all followed by a capital reorganisation involving reduction of issued share capital.

From as early as 2002, there have been Hong Kong listed companies changing their domicile to Bermuda in order to take advantage of the commercially expedient regulatory regime in Bermuda on capital reductions. Unlike the Cayman Islands and some common law jurisdictions, a capital reduction does not require court sanction or creditors’ consent under Bermuda law. Provided that the relevant requirements are complied with, namely the Bermuda newspaper notice requirement and the applicable solvency test required to be considered and passed by the board of directors, the capital reduction can be effective as soon as shareholders’ approval resolution is passed. Statutory ﬁlings in Bermuda are only required to be done after the effective date of the reduction and do not impact on the timing of the reduction. During the past decade, there have been a steady ﬂow of Hong Kong listed companies changing their

The Bermuda Companies Act allows a foreign corporation to apply to be continued in Bermuda as an exempted company provided the applicant can demonstrate that it has obtained all necessary authorisations required under the laws of the country in which it was incorporated to enable it to effect the migration to Bermuda.

The shareholders’ resolution approving the capital reduction usually provides that the credit amount arising from the reduction be transferred to the contributed surplus account of the Bermuda company, which can then be applied to set off against the accumulated losses of the company. With the accumulated losses eliminated or reduced, the company will then be in a better position to return to net profitability and pay out dividends in the future subject to compliance with the relevant asset and solvency tests. Some companies also take the opportunity to reduce its share premium account at the same time given that the relevant requirements for capital reduction are the same for share premium reduction. With the various challenges facing today’s global economy, namely, the debt crisis in Europe, the slower than expected recovery pace of the U.S. economy, the cooling of the Chinese economy, and the follow-on effects on the other economies, a capital reduction may be an attractive option for some listed issuers to consider. A typical reduction of issued share capital would involve the cancellation of the paid up capital of the company by reducing the par value of its issued shares. Another benefit arising from this process is that the par value of shares can be reduced without increasing the total number of issued shares, which would have occurred in the case of a subdivision of shares. A reduced par value can provide greater flexibility on the pricing of its future share offering especially for companies whose share price has been low due to lack of liquidity.

Continuance of a foreign corporation as a Bermuda exempted company means that, amongst other things, the property of the foreign corporation continues to be the property of the company; the company continues to be liable for the obligations of the foreign corporation; and any existing cause of action, claim, or liability to prosecution in respect of the foreign corporation is unaffected. The continuation of a foreign corporation under the Companies Act does not create a new legal entity or prejudice or affect the continuity

of a body corporate, which was formerly a foreign corporation and is now a company continued in Bermuda. The result of the continuation into Bermuda is that the foreign corporation becomes a company to which the Companies Act and any other laws of Bermuda apply as if it had been incorporated in Bermuda on the date of its registration. The procedure and documentation for continuation of a foreign corporation into Bermuda are very similar to that for an incorporation process. Instead of a memorandum of association, the foreign corporation will need to adopt a memorandum of continuance which will have similar content requirements but will contain some basic information on

its incorporation in the foreign jurisdiction. The continued company must, as soon as is practicable from the date of continuation in Bermuda, ensure that it has adopted by-laws which conform to the requirements of the Companies Act. Appleby is the only offshore law ﬁrm to cover all of the offshore jurisdictions approved by the HKSE (Bermuda, Cayman Islands, BVI, Jersey, Isle of Man, and Guernsey). Together with our wealth of experience in corporate ﬁnance, multi-lingual team, and long-standing presence in Asia, we are well positioned to offer our clients outstanding offshore guidance for their needs. ͻ

Partner with People who Know Risk Do you know your Risk Neutral state? Understanding your Captive’s Risk Neutral state is why partnering with a strong investment risk manager is important.

“From as early as 2002, there have been Hong Kong listed companies changing their domicile to Bermuda in order to take advantage of the commercially expedient regulatory regime in Bermuda on capital reductions. Unlike the Cayman Islands and some common law jurisdictions, a capital reduction does not require court sanction or creditors’ consent under Bermuda law. Provided that the relevant requirements are complied with, namely the Bermuda newspaper notice requirement and the applicable solvency test required to be considered and passed by the board of directors, the capital reduction can be effective as soon as shareholders’ approval resolution is passed.”

Capital G Captive Solutions delivers risk management expertise from Bermuda, the world’s top Captive Jurisdiction.

Capital G Captive Solutions

· Banking · Trusts · Asset Management TO LEARN MORE:

+1 441.294.2471 investments@capitalg.bm capital-g.com/private/investments

Welcome to the family.

Orion Investment Management Ltd. is a wholly-owned subsidiary of Capital G Investments Limited. Capital G Investments Limited and its wholly-owned subsidiaries are licensed to conduct Investment Business by the Bermuda Monetary Authority.

BERMUDA FINANCIAL SERVICES CONFERENCE The Harvard Club, 35 West 44th Street (Between 5th and 6th Avenues) New York, New York

There will be several panel sessions held throughout the day, lunch with the keynote panel session members and an evening reception. There is no charge to attend this event, but to secure your place at the conference, please visit www.businessbermuda.org.