Why Go Offshore?  Why Bermuda?

E-Commerce: Why Offshore…

Why Bermuda?

Bermuda:The Future of Offshore, Today

London, January 22, 2001

London, January 22, 2001

E-Commerce: Why Offshore…Why Bermuda?

Moderator: The Hon. MD Renee Webb, JP, MPMinister of Telecommunications and e-Commerce

Tim Marshall

Leigh Estabrook

Greg Wojciechowski

Dr. Robert Edwards

Timothy Z. MarshallSenior Partner

Marshall Aicardi

The Bermuda Advantage

Availability of secure and reasonably priced bandwidth from multiple sources Cable & Wireless 360 Networks

Bermuda is a strategic telecommunications hub

The Bermuda Advantage cont...

Respected international reputation and political stability Oldest democracy in Western Hemisphere Westminster Style of Government Both political parties committed to promoting and expanding

international business Laws and policies designed to let in only those businesses

that enhance Bermuda’s reputation

The Bermuda Advantage cont...

Familiar legal system, Legislation and policies Bermuda Courts and procedures are modelled after United

Kingdom with ultimate appeal to the Privy Council Bermuda’s laws are based on British legal traditions Companies Act, 1981 Electronic Transaction Act 1998 Corporate vehicle flexibility

The Bermuda Advantage cont...

Favourable and reputable tax environment Bermuda’s tax structure does not include income tax, profit

tax, capital gains tax or withholding tax Opportunities for legitimate tax planning OECD approved

The Bermuda Advantage cont...

Sensible immigration policies Designed to assist international businesses and promote

opportunities for Bermudians Bermuda is strategically located

Close proximity to the US/Canada Direct flights to and from the U.K. Businesses are conveniently able to operate in multiple time

zones

The Bermuda Advantage cont...

Sophisticated Infrastructure Established banking institutions with worldwide offices and

affiliates Multiple currency credit card processing facilities A choice of knowledgeable law and accountancy firms Skilled E-commerce service providers and work force

Examples of Bermuda’sE-Commerce Service Providers

Service Providers

360 Networks/ TeleBermuda Int’l World-class E-Commerce

Secure hardened facility with up to 1.28 terabit bandwidth capacity

climate controlled with back-up power facilities.

Cable & Wireless Comprehensive E-business

solutions centre inclusive of web-hosting

online payment processing solutions and high-speed internet access

Owned by Cable &Wireless PLC

Global Connectivity

Service Providers cont.

BTC Dynamic realm of Data

Services including high-speed LAN

WAN connectivity Ranges of data services

from DS-0(64kbs) through T3(45mbs)

Owned by Keytech, a Bermuda publicly traded company

North Rock Communicationscompetitively priced e-commerce plans

encompassing: credit card processing credit card merchant accounts fully customizable shopping carts Bermudian-owned

Service Providers cont.

Logic Communications One-stop shop for on-line

business Provides a range of services

from design strategies to secure hosting for e-commerce

Owned by Keytech, a Bermuda publicly traded company

E-Venture Centre Provides promising start-ups

with all the tools necessary to build successful e-businesses that traverse the globe

Joint venture between Centre Financial Services and Paragon Bermuda Ltd.

Legislative Environment

Electronic Transactions Act 1999 One of the first in the world Partnership between Government and private industry

Characteristics of Electronic Transactions Act 1999

Legal recognition of electronic records and signatory Recognition of the validity of electronic contracts The requirement for writing may be met in the form of

an electronic record Electronic records shall be admissible as evidence

Standard for Electronic Transactions

Established to protect Bermuda’s business integrity Set up as a standard for the service providers and

intermediaries carrying on business in or from Bermuda

Protection of personal data Creation of Safe Harbour Guidelines

Know Your Customer -Guidelines

Bermuda’s internal regulations to protect the Island’s business and integrity

Three facets important to know your customer Internal regulations OECD guidelines Anti-Money Laundering Legislation

Prohibited Activities

No gaming, lotteries or adult sites permitted to operate from Bermuda

Incorporation Process

Initial vetting by local service provider (normally a law firm)

Completion of disclosure documents for Government (disclosure not for public review)

Choice of capital structure (minimum US $12,000 share capital)

Incorporation Process cont.

Choice of name and upon receipt of materials, submission to Bermuda Monetary Authority for review

Government approval

Incorporation Process cont.

Organisation - either: two Bermuda directors; or one Bermuda director and one Bermuda secretary; or one Bermuda secretary and one resident representative

Annual Fees Normal Process time - one to two weeks

Bermuda’s Legislative Approach is Responsiveto Innovative Businesses and a World Economy

Transparency of laws and regulations guarantee recognition of Bermuda companies by foreign jurisdictions

OECD and EU endorsed regulations An E-Commerce Ministry and Government’s close

partnership with Bermuda’s business community means legislation and regulations can be fast tracked to take advantage or respond to world conditions, business needs and opportunities

Leigh EstabrookExecutive Vice PresidentFirst Atlantic Commerce

Fundamentals…

Internet merchants are the first generation of "mobile" merchants who can now choose where they wish to domicile their e-business

To be successful in the B2C world, e-businesses need to be able to accept credit and debit cards in currencies suitable for their target consumer markets

Mid-size B2B entities are now shifting from traditional payment methodologies to credit card payment solutions

Fundamentals… VISA and MasterCard mandate that a corporate presence and

back office support is required in the same country as the settlement bank

Currency of the Internet (for the time being) is USD shifting towards multi-currency capabilities

Bermuda falls into the Latin America Caribbean Region which is a USD denominated processing interchange

Two processors in the LACR are able to provide multicurrency payment solutions to banks and Internet merchants

Why Bermuda?Business simplification - Obvious advantages

Legal system based on English Common Law Political and economic stability Tax neutrality ie corporate income tax and sales tax Well regulated e-commerce environment – ETA, The Standard,

Proceeds of Crime, etc. Access to reputable legal, accounting, banking, technology services Bandwidth galore – one "wired" island!

Why Bermuda?Business simplification - Not-so-obvious advantages

Ability to establish an e-business for USD or multi-currency processing, including the Euro and pound sterling without the requirement of a US incorporation

Free access to foreign currency – no foreign currency exchange controls

Banks will review/accept virtual e-business start-ups Multi-currency pricing and settlement services available

Why Bermuda?Business simplification - Not-so-obvious advantages

Separate region for Card Association compliance regulations from Europe and North America

Banks can provide VISA, MasterCard, AMEX through a single merchant account – no duality issues in the region

Ability to establish a "VirtualCorp" under the First Atlantic Commerce E-commerce Act 1999

What is a VirtualCorp? Enables businesses to establish a corporate presence in

Bermuda without the requirement of a "full" incorporation A VirtualCorp is based on the Segregated Cell concept

adopted from the captive reinsurance market Each client’s assets and liabilities are “firewalled” from

other clients, thus segregating one account from another Deemed approved legal structure by Visa and MasterCard

for the purposes of their regulatory compliance requirements

What is the value of a “VirtualCorp”?

Enables e-businesses to establish their incorporation in their choice of jurisdiction for the purposes of meeting their business requirements

AND

Fully access all the obvious and not-so-obvious business advantages that Bermuda has to offer to maximize their e-business growth

Online rental payments Travel portals and vacation rentals Online investment sites Entertainment sites

CDs videos concert simulcasts graphic arts

Business information portals Domain name registration services Insurance companies (consumer)

Primarily digital content e-businesses such as:

Who's setting up offshore?

Software E-Media

online magazines distance learning university registration services

Conferences with online registration

Legal firms for incorporation and registry services

Telephony services – subscription based billing

First Atlantic Commerce Ltd

Bermuda-based; established in April 1998 Provide turn-key e-commerce solutions for e-businesses

and financial institutions FAC solves complex business issues through the use of

unique Internet payment solutions (split jurisdictional, multi-jurisdictional, etc.)

Advanced industry expertise with e-commerce payment solutions, fraud management, web site security and international Card Association compliance regulations

First Atlantic Commerce Ltd First Data Corporation qualified Internet Payment

Gateway – providing multi-currency payment solutions to banks on their North American and Caribbean platform

Qualified Internet payment gateway with First E-commerce Data Services (FEDS) in Bermuda, offering full end-to-end multi-currency payment solutions

Strategic partners include VISA International, First Data Corporation, Bank of Bermuda, Cable & Wireless, and others located in other jurisdictions

The advances of the Internet have created an explosive opportunity in offshore e-business that is only starting to be realized

ACCESS AN OCEAN OF INNOVATION.

BERMUDA

Greg WojciechowskiChief Operating Officer

Bermuda Stock Exchange

Bermuda Stock Exchange

The world’s leading fully electronic offshore stock exchange

GOING PUBLIC

“It’s a Question of WHEN not IF”

Why Go Public?

Benefits of Going Public

Raise Public Capital Increase Market Recognition Greater Marketability Improved Valuations Improved Opportunities for Future Financing

Benefits of Listing on a Stock Exchange

Trading venue = Liquidity Listed Shares are a form of Currency Regulatory Oversight/Investor Protection Information dissemination

BSX Shorts

Founded 1971 SEC Recognition, DIE pending FIBV Full Member OECD Member Nation Over 320 Listings; 210 Funds Daily Trading and rolling T+3 Settlement Trading volume 2000 $230 Billion Market Cap: > in excess $148 Billion

Timing is Everything

Is the Company Ready? Are Market Conditions Favourable? Has the Market been Prepared for the Company? Is the Company Large Enough to Get Noticed? You Only Have One Chance to Make a Good Impression! Plan Carefully

Disadvantages of GoingPublic Too Early Enormous Pressure on Management’s Time

Poor Valuation in the Secondary Market

Investor Relations Nightmare

Onshore Stock ExchangeListing Requirements

Initial Listing Requirements

Minimum Market Cap (size) Minimum Profitability Minimum Track Record (ongoing operations) Minimum Shareholder Spread Minimum Share Price

Key Stock ExchangeListing Requirements

Ongoing Listing Requirements

Regular Reporting (qtrly, semi-annual and annual) Compliance with accounting standards Disclosure of major/material events Disclosure of substantial shareholders Disclosure of directors and officers remuneration

Early Listing OptionsNorth America

NASDAQ – National Market, largest and most actively traded stocks. More than 4,400 securities. Small Cap market created for emerging growth companies, some 1,800 securities listed. www.nasdaq.com

The Canadian Venture Exchange (“CDNX”), newly established market (following the Canadian capital market re-structuring in 1999) for small to medium sized companies (min mkt cap . Over 2,400 securities listed. www.cdnx.ca

Early Listing OptionsEurope

EASDAQ, modelled on NASDAQ, for the listing and trading of shares in high-growth companies. Currently lists 56 companies and dual lists 17. www.easdaq.com

Euro.NM, the pan-European network of regulated stock markets. Its sector focus is high growth, small and medium sized companies within the European time zone. Currently over 400 companies are listed. www.euronm.com

Neuer Market, established by the Deutsche Borse in March of 1997 for high-growth potential start up companies. Neuer Market listing contribute up to nearly 50% of the stocks listed on the Euro.NM. The Neuer Market has over 200 listed securities. www.neuer-markt.de.

The BSX’s Mezzanine Market

“And Now For Something Completely Different”

www.mezzmarket.com

Going Public Without Doing an IPOThe BSX Mezzanine Market

“Listed Private Equity” Institutional Marketplace – Qualified Investors only Sits Between the “Family, Friends and Fools” Round

and the Ultimate IPO on an International Exchange – Hence “Mezzanine”

QI’s = The Wealth, Wise and Well Advised Focused on E-commerce and Hi-Tech Companies

Advantages of theMezzanine Market Extremely Simple Listing Requirements Preparatory phase for future IPO, thus providing insulation from

market gyrations that may impact share/company valuation Enhances Public Image and Prestige of Company Exposes management to regulatory oversight and reporting

requirements while not being overbearing Secondary trading facility via a fully electronic central limit order

book trading platform Gives Angels & VC’s comfort that a liquidity event (IPO) pending

BSX/Mezzanine Market Success Stories

FirstEcom.com Inc. 360 Networks – (formerly TBI and GlobeNet

Communications) Earthport.com Conexys Corporation Imumed International

Admission Procedure

Appoint Sponsoring Broker Application letter Supporting documentation A Prospectus = Private Placement Memorandum

On Going Responsibilities

Material News Annual Financial Results Authorized Representation in Bermuda

BSX-Mezzanine Market When is Now!

The answer to your timing problem Prepare the market for your IPO from a recognized

offshore stock exchange in a highly regarded jurisdiction. Get management accustomed to regulatory compliance. Enhanced distribution to a sophisticated investor base.

Dr. Robert EdwardsChairman and Founder

Drawn and Quartered.com Ltd.London