Outbound Investments and Cross Border Financing April 2008 Mumbai, India Itzik Amiel, adv.

1. Outbound Investments and Cross Border FinancingApril 2008Mumbai, IndiaItzik Amiel, adv.

2. Agenda • ANT/AMACO Introduction; • International M&A Techniques: Structuring outbound Investments; • Cross-border Financing; • Proven Tax Structuring opportunities with India.

3. ANT/AMACO Introduction

4. ANT/AMACO Group’s Profile About Us • Origin: ANT - 1897, Amaco - 1956; • Independent - maintain a position of absolute independence towards its business partners and clients; • International - international scope; strategically positioned to cater to the strong international growth in demand for our services; • In-Business - positioning ourselves as partner in business to help the strength and the growth of our clients; • Tradition of Trust - established track record and long-lasting relationship.

5. ANT/AMACO Group’s Profile About Us • We are a genuinely international management, trust, corporate and asset administration group; • A growing global network - ANT Group continues to grow. To build extra capacity, we are investing heavily in human resources, technology and infrastructure, and in the next few years, we expect to increase the size of our network also to other jurisdictions; • Acts under supervision of the Dutch Central Bank as per the WTT (Act on Supervision Trust offices) and under the Netherlands Antilles central bank [while the NV is under the supervision of AFM]; • Strong emphasis on professional skills, such as; • Language skills (English, French, Dutch, German, Italian, Spanish, Portuguese, Greek, Arabic, Croatian, Bulgarian, Chinese and Hebrew) at “operational level”; • Qualifying (Tax) Legal degrees; • Qualifying Accounting degrees.

6. The Added Value of ANT/AMACO Reasons to involve ANT/AMACO: • The solid financial background and track-record; • High commitment/ loyalty of clients; • Close contacts with advisers and clients. • Administration capabilities for Implementation of tax planning (based on a tax lawyer’s advice); • Administration capabilities for Implementation of financial engineering advice (based on the financial advise); • Confidentiality; • The global network (intermediaries; clients etc.). • Proven successful experience with Indian clients.

7. The Added Value of ANT/AMACO Benefits for client: • Global platform • Geographical platform providing a range of services for trust and fiduciary services from which to develop new business opportunities • Expertise • High quality workforce with extensive experience in rendering administration services for structuring of, private and corporate wealth/ transactions, and long commitment of employees to ANT/AMACO.

8. The Added Value of ANT/AMACO Benefits for client: • Quality • High level compliance and risk management minimizing reputation risk for the business and its partners. • Independence • Focused independent service provider with minimal conflicts of interest with its partners or clients. • Inpersonal • We know our clients and our clients know us.

9. Types of Clients Main types of clients of ANT/AMACO: • Large-medium national and multinational companies; • Institutional clients; • High Net Worth Individuals. We are proud to have the largest Indian clients portfolio

10. ANT/AMACO - Products and Services Tax Driven: • Management & Domiciliary services (for Holding, finance, royalty and investment companies); • Corporate Services; • International Licensing and Collection services; • Off-shore trading/re-invoicing companies; • Anglo-saxonTrust Services; • Business Center Facilities (for substance purposes); • Captive Insurance companies (in some of the locations); • Off-shore banking.

11. Licensing & Financial Services Two dedicated subsidiaries: • A Dutch company focusing on the exploitation of intellectual property rights (“IP Rights”) and other intangible assets company incorporation or sale of existing companies. NCS Universal Rights B.V. NCS Finance B.V. • A Dutch company focusing on the rendering financial services like escrow arrangements and back-to-back loans and also focusing on the ownership of Special Purpose Vehicles.

12. ANT/AMACO - Products and Services Non-Tax Driven: • Structured Finance Services: • Securitization Deals; • Special Purpose Vehicles; • Other Special Products. • Escrow Services; • Custody services; • Trustee services; • Paying Agent services;

13. ANT/AMACO - Products and Services Non-Tax Driven (continued): • Asset Administration Services: • Electronic Voting; • Employee Benefit Programs; • Securities Investment systems; • Custodian for Investment Funds. • Registrar and Shareholder Services: • Administration of shareholders registers; • Personal Consult and Support. • Fund Administration Services.

14. International M&A Techniques Structuring outbound Investments

15. Recent Headlines on Indian M&A • Forbes : “2007 isn't even half done, but it’s already been a record year for mergers and acquisitions in India. There has been over $50 billion worth of equity deals from January through May (…)” • (Article of 12 June 2007 on M&A Report by Grant Thornton Corporate Advisory Services) • Reuters: “Indian firms flush with funds are expected to spend more than $35 billion (17.7 billion pounds) this year on buying or merging with foreign companies (…) Corporates are not only scaling up the size of their overseas acquisitions, but there have been several instances of Indian firms buying out companies abroad that are far larger in size compared to them” • (Article of 17 June 2007 on report from Ernst & Young and the Federation of Indian Chambers of Commerce and Industry) 15

16. Tax Objectives of Acquisition Structuring 16

17. Basic Techniques: considering 5 levels • Treatment of dividend income and capital gains • Repatriation (withholding taxes) • Local tax exposureLook-through or legal entityGoing public • Dividend and capital gains (treaty protection) • Local taxes Investors Level 1 Level 2 Investmentvehicle Level 3 Level 4 Investments Level 5 Investments Investments 17

18. Use of Holding Companies • Easier to acquire and to divest subsidiaries • Debt push down strategies (merger/consolidation) • Capital gains or losses tax planning • Withholding tax planning • Consolidation of earnings and/or losses • Repatriation of earnings Location: where activities generally take place or can be located 18

19. Acquisitions Structuring Tools • Debt push down or debt push up • Treaty or Directive shopping • Use of hybrid entities through check the box regulations, PE’s, partnerships, et cetera. • Double dipping or equity boosters • Migrating entities (dual residents) • Converting cash flows (interest vs. dividends) • Review of business models (commissionaire, IP development) 19

20. Acquisitions Financing Considerations • Third party debt or shareholder funding • Debt servicing capacity (free cash flows) • Security (financial assistance, white wash) • Arm’s length character of debt (rate, other conditions) • Tax deductibility of interest (thin cap, anti-abuse) • Efficiency of interest deductions (set off against profits) • Accounting issues (re-characterization as equity) Leveraging acquisitions increases return on investment 20

21. Acquisition Structure – basic structure • Aims to realize single interest deduction through debt push down • Interest expenses directly set off against profits of investment by tax consolidation or legal merger • Issues are generally thin cap and other anti-abuse measures • Alternative from investors lending funds Investors Investmentvehicle Bank loan Principleinvestment 21

22. Cross Border Financing The Netherlands

23. The Netherlands: Inbound Investments General considerations: • Maximize debt in the Netherlands to shelter taxable income → tax consolidation → deduction of interest expense • No withholding tax on interest • No step-up of assets/goodwill without gain recognition • Exit planning → dividend withholding tax → ‘substantial interest’ tax liability

24. The Netherlands: Inbound Investments Basic acquisition structure: • Dutch Acquisition Co. And Dutch Target form ‘fiscal unity’ (tax consolidation); • Interest payable on bank loan fully deductible note: guaranteed loans; • Interest payable on shareholder loan is deductible, subject to: → anti-base erosion rules → thin capitalization rules Buyer Equity+ shareholder loan Dutch Acqu. Company bank loan Dutch target 24

25. The Netherlands: Inbound Investments Limitation on tax deductible interest only for related-party debt: • Related-party debt; • Anti-base erosion rules (article 10a): → business reasons for related-party debt? → lender (Buyer) is subject to tax on interest income (effective tax rate > 10%)? • Thin cap restrictions (article 10d): → Does taxpayer belong to a “group”? → excessive debt 25

26. The Netherlands: Inbound Investments Thin cap – excessive debt – example (simplified): Equity 85 Intra-group loan 300 Bank loan 225 Interest expense (5%) 15 + 11,25 = 26,25 • fiscal test allowed debt : 3 x 85 = 255 actual debt : 525 excessive debt : 270 not deductible : the lower of (i) 15 or (ii) 270/525 x 26,25 = 13,5 • group test d/e ratio of group : 5 debt : 1 equity (assumed) allowed debt : 5 x 85 = 425 not deductible : 100/525 x 26,25 = 5 26

27. The Netherlands: Inbound Investments Thin cap limitation not applicable in LBO because of definition of “group” Fund LP buyer Shareholder loan Dutch Acqu. Co. Dutch target 27

28. The Netherlands: Inbound Investments Example 1: Structure LBO/ exit structuring Fund LP buyer Shareholder loan Dutch Coop Acquisition Company Dutch target • No dividend withholding tax on distributions by Coöp to Fund LP; • Ruling policy: no substantial interest taxation if Fund LP owns Coop as business asset (tbd on Dutch tax principles) 28

29. The Netherlands: Inbound Investments Example 2: Structure LBO/ exit structuring Fund LP Shareholder loan Lux Co. Shareholder loan Dutch Acqu. Co. Dutch target • LuxCo and Fund LP do not form “group”; • Tax treaty / EU P-S Directive prevents dividend withholding and substantial interest taxation 29

30. The Netherlands: Inbound Investments for US investors: CV/BV-structure Envisaged tax results: • Double deduction; • interest income not currently taxed in US; • No withholding tax on interest and dividends 30

31. The Netherlands: Inbound Investments • CV/BV – structure / points of attention: • Only for genuine third-party acquisitions. Transactions must meet business motive test. Intra-group transactions caught by Dutch anti-base erosion rules. • Article 24(4) of NL/US Treaty denies treaty benefits for payments through ‘hybrid’ entities: • “In the case of an item of income, profit or gain derived through a person that is fiscally transparent under the laws of either State, such item shall be considered to be derived by a resident of a State to the extent that the item is treated for the purposes of the taxation law of such State as the income, profit or gain of a resident.” (cf. IRC Sec. 894(c) Regs) However, the Netherlands has unilaterally waived the application of 24(4) of Treaty, subject to satisfaction of ‘light’ substance requirements. • US Corp must satisfy requirements for 0% withholding under article 10(3) of Treaty (80% voting for 12 months period plus specific LoB requirements). If not, NL Holding may be organized as a Coöp. • Activities of CV should neither cause CV to have effectively connected income for US purposes, nor a permanent establishment in the Netherlands or any other high taxed jurisdiction. • Transfer restrictions apply regarding LP interest in CV in order to ensure transparency for NL tax. • Ruling possible 31

32. The Netherlands: Outbound Investments General considerations: • Participation Exemption; • Tax deduction of interest expense on acquisition debt; • Hybrid debt; • Hybrid companies 32

33. The Netherlands: Outbound Investments Participation Exemption: • Scope: full exemption for any benefits derived from a qualifying participation (including capital gains upon full or partial exits, dividend distributions, recapitalization distributions, liquidation distributions, certain earn-out payments and results from options and shares). Capital losses are not deductible, except liquidation losses. • A number of changes as per 2007. Most significant for international planning: → Participation exemption can no longer be applied to participation of less than 5%, unless affiliate owns 5% interest (3y-grandfathering of existing structures and for new structures, in case of dilution below 5%). → Subject-to-tax test and non-portfolio test abolished, but replaced by a specific exclusion for “low-taxed passive subsidiaries”. Under this new test, subsidiaries disqualify if they fail both the ‘assets test’ and the ‘taxation test’. Asset test: a subsidiary fails the ‘assets test’ if more than 50% of the directly or indirectly held assets consists of passive investments. Taxation test: effective tax rate of 10% over a taxable base that is determined according to NL standards. 33

34. The Netherlands: Outbound Investments • Other issues: • Tax consolidation; • Tax deduction of interest expense on acquisition debt; • Use of hybrid instruments. Under Dutch tax principles, debt is re-classified as equity only if: → profit sharing, → subordinated, and → term > 50 years 34

35. The Netherlands: Outbound Investments Use of hybrid entities (example simplified): Structure: → SC is hybrid entity → SC, SL and Target form group in Spain (interest expense tax deductible against operating income of Target) → NL buyer deducts interest expense on loan to SC → NL buyer claims participation exemption for SL Shares 35

36. The Netherlands: Outbound Investments • Various: • Group Interest Box → state aid? • Foreign group financing vehicle → participation exemption? 36

37. Proven Tax Structuring With India

38. Holding- Dutch Intermediary Company IndiaCo 100% DutchCo 10% WHT (article 10 Treaty) 0% CIT (participation exemption) 100% 100% LTSub1 LTSub2 generally no WHT (domestic law)

39. Holding – use of losses IndiaCo Capital DutchCo losses Loan Interest TaxHaven

40. Group Financing – Hybrid Loan [1] IndiaCo Capital LuxCo Hybrid Loan Group Loans DutchCo

41. LP Group Financing – Hybrid Entity [1] DutchCo Loan Target

42. Group Financing – Hybrid Entity [2] bank loan IndiaCo equity BelgCo i/c loan Sub1 Target

43. Finance/IP in low tax jurisdiction IndiaCo 100% 100% TaxHavenCo. DutchCo Loan/license 100% Dividend/Interest/Royalty on sublicense Foreign Sub

44. Caveat WE ARE NOT TAX ADVISERS ! • ANT/AMACO does not advise on tax or legal matters. When structures are discussed, the purpose is to find a potential solution for a specific issue, which should subsequently be checked with the client’s tax or legal advisor. • This applies at the beginning of the relationship as well as during its lifetime. It also applies if and when NCS Universal Rights or NCS Finance is involved. • Before actually entering into a relationship ANT/AMACO needs to check and verify the background and the motives of the planned transaction(s) and the reputation and identity of the parties directly and ultimately involved.

45. End Note. Albert Einstein We owe a lot to the Indians, who taught us how to count, without which no worthwhile scientific discovery could have been made

46. Itzik Amiel, Adv. (LL.B., LL.M.)Director International Business DevelopmentT: +31 20 5222 555M: +31 6 50801285F: +31 20 5222 500E: i.amiel@ant-trust.nlW: www.Ant-Trust.nl Thank You!