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PRIVACY CHALLENGES A Competitive Response SENTINEL INTERNATIONAL ASSET MANAGEMENT Goodman’s Bay Corporate Centre, West Bay Street, Nassau, Bahamas Tel:

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Presentation on theme: "PRIVACY CHALLENGES A Competitive Response SENTINEL INTERNATIONAL ASSET MANAGEMENT Goodman’s Bay Corporate Centre, West Bay Street, Nassau, Bahamas Tel:"— Presentation transcript:

1 PRIVACY CHALLENGES A Competitive Response SENTINEL INTERNATIONAL ASSET MANAGEMENT Goodman’s Bay Corporate Centre, West Bay Street, Nassau, Bahamas Tel: 242-502-7000 Fax: 242-356-7466 E-mail:

2 2 Contents Summary The Immediate Challenge to the Bahamas An Immediate Solution Product Concept The Colina FlexFund Deferred Variable Annuity The Strategic Alliance Appendix I: Colina Insurance Company Limited Appendix II: Sentinel International Asset Management (SIAM) Appendix III: SIAM Funds and

3 3 Summary Fundamental trends promoting strong challenge to banking secrecy in the world’s no/low tax privacy havens Immediate problem for Bahamas-based institutions are the U.S. Qualified Jurisdiction/Qualified Intermediary rules One solution protecting relationship with private clients is insurance contracts legally providing privacy and unlimited tax deferral We propose an alliance that provides an insurance wrap for your private client relationships that: –Protects the privacy of your clients –Protects your relationship with your clients –Offers new services that will benefit you and your clients

4 4 The Immediate Challenge to the Bahamas Crises to be resolved –U.S. has delayed grant of Qualified Jurisdiction status to Bahamas –Prevents Bahamian bank eligibility for Qualified Intermediary status –All clients owning U.S. assets face immediate exposure After January 1, 2000, beneficial owners of U.S. assets in custody must be reported, or 30/31% withholding on dividends, interest and gross proceeds of U.S. asset sales –Competitive disadvantage with Cayman Islands (granted QJ status) New legislation may severely reduce banking secrecy –Judiciary may lose power to protect banks from unreasonable intrusion –Proposed Financial Intelligence Unit will have extraordinary enforcement powers Legal controversy on protection for trusts, IBC’s and mutual funds –May provide temporary safe harbor –Certain to come under early and intense attack

5 5 An Immediate Solution We have an insurance product in place that –Can immediately house new and existing assets held in the Bahamas –Eliminates all individual and intermediary reporting requirements –Legally defers taxes on U.S. investment income for an indefinite period Structured as an insurance wrap on private client relationship –Protects the client –Preserves flexible investment powers for advisor –Strong lock-in effect on client assets

6 6 Product Concept Structured as a Flexible Premium Deferred Variable Annuity –Traditionally, legal way of deferring taxes on investment income in U.S. –Meets U.S. tax deferral rules –One time 1% excise tax paid by U.S. person for policy from non-U.S. insurer Flexible investment powers –Each policy has segregated reserve (asset) account owned by Colina –Policy owner or agent directs selection of funds and activity No reporting requirements on investments or income prior to term of policy –By Company to Bahamas –By insured to home Government Delivered by an alliance between –Private bank –Client’s legal counsel –Colina Insurance Company Limited (See Appendix I) –Sentinel International Asset Management Ltd (See Appendix II)

7 7 The Colina Deferred Variable Annuity Colina FlexFund Establishes segregated series Acts on policy owner instructions Accounts for investment performance Legal Entity Applies for Policy Sends funds to escrow account Selects funds Colina Insurance Approves and issues Policy Transfers funds to Colina FlexFund Policy service Other Funds Requested by policy owner Approved by Colina FlexFund Any Corporation No/low tax jurisdiction Owned by Colina FlexFund Beneficial owner Colina Insurance Company Limited Directed by trusted private bank approved by Colina Any legal business May hold any property acquired via purchase or exchanges for private annuity SIAM Managed Funds* SSTIF (Money Market Fund) SIAM U.S. Large Cap Markets SIAM Diversified Investments SIAM U.S. Growth Markets SIAM Europe SIAM Principal Protected Bond Fund SIAM Forfaiting ABS SOS+ (high yield bond fund) Liquid Opportunities Plus *See Appendix III Sentinel Bank & Trust FlexFund Administration FlexFund Accounting SIAM Directs FlexFund investments Evaluates new options

8 8 Private Bahamian Bank Banking license Trust and corporate services Trading and investment management Relations with major U.S. and non-U.S. custodian banks The Strategic Alliance Bahamian Legal Counsel Client legal, estate and tax advice Legal design of investment products Colina Insurance Company Bahamian domestic insurance company Delivery of investment products via fixed and variable annuities issued in Bahamas Asset Allocation Investment Products Optimal Delivery Vehicles for Privacy and Efficiency Sentinel International Asset Management Investment product analysis and design Portfolio management for funds, private and institutional accounts Trading services for private and institutional clients Atlantic Portfolio Analytics and Management, Inc Investment research and analysis Securities database infrastructure Product structuring Internet fund marketplace See Appendix I for more information

9 9 Appendix I Colina Insurance Company Limited Founded in 1965 Provider of health and life insurance for over thirty years Purchased from CIGNA in 1997 by INSCO A completely Bahamian company that provides comprehensive financial services –No OECD business base –No OECD ownership Reputation for integrity, trust and service –One of largest administrators of public company and Government pension assets in the Bahamas –Over 54,000 life and health policies in force Demonstrated record of innovation and performance –Founding member of Bahamas Stock Exchange –Raised 80% of all capital in new public offerings in Bahamas in last year


11 11 Concept Deliver world class investment services in the international environment Providing clients a full range of investment alternatives with –Efficient and responsive client service –The highest standards of investment performance –Flexible delivery options that protect investor privacy Through an alliance of dedicated experts operating in the Bahamas Sentinel International Asset Management is housed in the most modern facility in the Bahamas, with direct satellite and high bandwidth fiber optics cable access to the Internet.

12 12 Client Service Offer the investment products that investors want –A full set of investment options –Deep expertise in specialty market investments –Strong trading skills and relationships House assets in the most effective vehicle available –Privacy –Asset protection –Tax efficiency –Favorable conveyance properties Most modern electronic communications systems Solid operational support in all phases of asset management process Total commitment to the private conduct of private affairs

13 13 Investment Services Comprehensive asset allocation analysis Internally managed funds where we offer a clear competitive advantage –Unique technologically driven investment strategies –Benign transparency and protection for the investor Branded or third party funds to access the best available investment products Efficient trade execution for client accounts Delivery vehicles that optimize privacy and conveyance properties

14 14 Investment Performance The prerequisites of good investment performance are –Integrity of valuation and risk management analytics –Trading discipline –Operational efficiency Exploiting risks that are –Measurable –Manageable –Necessary (to achieve the return objectives of the client.) Delivered in investment vehicles that –Are structurally appropriate for the liquidity and risks of the underlying strategy –Provide transparency and liquidity –Maximize net returns to the investors

15 15 Investment Technology SIAM integrates the state-of-the-art computational finance into its investment process –Market and risk factor simulators Treasury and swap based term structure models Mortgage prepayment models Credit default models –Portfolio risk and return measurement Large scale horizon return simulation Generalized duration analysis VAR and bounding case analysis –Portfolio optimization systems –Investment management process integrated with investment technology Data support infrastructure –160 Gigabyte database of 1.2 million securities including Agency mortgage passthrough and derivative securities Treasuries and Agency securities Models and data on most structured ABS and MBS products Price histories for securities and options –Ability to manage data on security or portfolio level –Distributed processing across a network of high- end workstations Example: SIAM analytic system defines horizon return profile for complex mortgage derivative portfolio at different degrees of leverage.

16 16 Delivery Vehicles Custom designs to meet all client needs –Transparency –Liquidity and accessibility –Privacy Optimally exploit combinations of all available legal structures –Private banking relationship with independent Bahamian bank –Trusts –Exempt corporations –Funds –Deferred variable annuity products –Internet marketplaces Strategic alliances to provide all elements for products that meet the most exacting client specifications

17 17 Management Expertise Jon M. Knight, Ph.D. As President of SIAM, Dr. Knight supervises the investment management process, research, product and business development. He has been providing economic and investment advice for over twenty-five years, serving as Chief Investment Officer for a US investment manager with over US$3 billion under management, as Vice President of U.S. financial technology company, Director of a Bermuda reinsurance company, and Director of Sentinel Bank & Trust, Ltd. Dr. Knight has also been an Associate Professor of Economics at the Florida Institute of Technology and served as Chief of Economic Forecasting for the Florida Legislature. He earned a Bachelors of Industrial Engineering from the Georgia Institute of Technology and a Master of Engineering and a Ph.D. in Economics from Texas A&M University. Series 3, 7, and 24 licenses in U.S. J. Anthony Huggins, Ph.D. As Managing Director of SIAM, Dr. Huggins is involved in product and business development and serves on several investment committees for funds operated by SIAM. He has been providing economic and investment advice for over thirty years, serving as President of a US$3 billion US investment manager, President of a U.S. financial technology company, Chairman of Board of a Bermuda life reinsurance company. Dr. Huggins also served as Chief Economist and Investment Strategist for Florida’s State Board of Administration (which manages the $100 billion State employee pension fund), and Chief Economic Advisor to Florida Governors Askew and Graham. Dr. Huggins earned his Ph.D. in Economics from Florida State University. Series 3, 7 and 24 in U.S. Raymond Pousaz, MBA As Managing Director of SIAM, Mr. Pousaz is involved in product and business development and serves on several investment committees for funds operated by SIAM. He has been providing financial and investment advice for over thirty years. acting as Managing Director of Swiss owned investment management firm in Nassau. General Manager of Uto Bank, a Zurich private bank, and Managing Director of Bankers Trust AG Zurich and Vice President of Bankers Trust Company. Mr. Pousaz is a graduate of Lausanne University and earned a Master Degree in Business Administration from the Harvard Business School. He was chairman of the Harvard of Club of Switzerland (Geneva) and is a director of numerous corporations.

18 18 Investment Expertise Joseph E. Muehl, MBA Mr. Muehl is Managing Director of Trading at SIAM and serves as manager of two portfolios. He directs relative value analysis and trades all investments related to MBS collateral. He develops and executes hedging strategies using liquid Government Agency MBS passthrough securities for SIAM’s investment funds. Mr. Muehl has fourteen years of experience in actively trading MBS passthroughs for Wall Street firms such as Union Bank of Switzerland (UBS), Prudential Securities and Dean Witter Reynolds. Mr. Muehl earned a B.S. from Rutgers University in 1982 and an MBA from Fordham University in 1985. Jonathan P. Knight, Ph.D. Dr. Knight is Managing Director for Technology at SIAM and serves as portfolio manager of two portfolios. He is expert in the analysis and trading of mortgage related asset backed securities and mortgage derivatives. He manages risk modeling and due diligence efforts prerequisite to investing in these sectors. Dr. Knight was previously responsible for managing Levered Mortgage Arbitrage portfolios, overseeing the capital committed to levering and hedging mortgage derivatives and correlated instruments. Prior to SIAM, Dr. Knight was Director of Research for a US$3 billion U.S. investment manager. Before entering the financial arena, Dr. Knight’s technical background was in large-scale optimization of chemical process design. He earned his Ph.D. in Chemical Engineering with a minor in Applied Mathematics from MIT. Anthony R. Ferguson, CFA As Managing Director of SIAM, Mr. Ferguson brings fourteen years of experience to his role as portfolio manager and trader for two of SIAM’s funds and directs the execution of equity trading for all client accounts. He is also Director of two insurance companies and Sentinel Bank & Trust, Ltd., past member of Securities Market Task Force and Director of the National Insurance Board. He has a degree in Finance from Acadia University and is past President of the Bahamas Society of Financial Analysts. He is currently a member of the Council of Examiners for the Association of Investment Management & Research (AIMR).

19 19 Operational Expertise Richard T. Grelecki Based upon twenty-five years of financial experience, Mr. Grelecki provides advice on business valuation and on the credit-worthiness of underlying collateral for asset backed security deals. He is Chief Operating Officer of a U.S. financial technology firm. Previously COO of US$3 billion U.S. registered investment advisor and past Chairman and CEO of Palm Beach Savings, a south Florida banking institution. Deborah Krise Ms. Krise has over eighteen years experience in all aspects of portfolio operations, fund administration, and securities portfolio accounting for total return funds, hedge funds, insurance companies and banks. She has managed settlements, collections and payments, fund administration, and fund accounting functions. Ms. Krise has special expertise in accounting for all types of mortgage, asset backed and derivative securities and levered portfolio performance. Amy Sorrell Ms. Sorrell has over ten years experience in all aspects of trading and managing the operations of both total return and levered capital portfolios. She has handled both trading of short-term instruments and active financing and collateral management of portfolio positions among multiple dealers. Moreover she has managed all aspects of portfolio operations, including establishing and maintaining credit lines with dealers and management of data management system integrity. Desiree Parker Ms. Parker has five years of experience trading Treasuries, Commercial Paper, and repurchase agreement transactions, and she executes equity trades on the behalf of client accounts. She is a member of the Association for Investment Management and Research, and was awarded the CFA charter in September 1999. Prior to joining the Investment Manager, Ms. Parker was a Senior Trust Officer for Ansbacher (Bahamas) Ltd. She holds a Bachelors Degree in Finance from Acadia University.

20 Available SIAM Funds Appendix III

21 21 SIAM Funds

22 22 SIAM Funds

23 23 Two SIAM offered hedge funds currently listed and included in hedge fund index –ABS SOS Plus Partners, Ltd –Liquid Opportunities Plus Fund, Ltd has been developed to provide: –Internet hedge fund marketplace –Standardized fund structure –Subscriptions and shares maintained through Euroclear or Clearstream –Fund information published real time on Daily risk analysis by S&P Daily or real-time valuation by Ernst & Young Bids and offers posted by primary dealer market makers –Shares traded 22/6 on Bermuda Stock Exchange

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