1. Guest speaker – Raffi Sossoyan  Licensed Canadian chartered professional accountant and U.S. certified public accountant. – Currently Vice-President, Global Financial Reporting at Velan Inc. Copyright © 2014 McGraw-Hill Ryerson, Limited. All rights reserved. 1

2. Guest speaker – Raffi Sossoyan  Previously, was a Canadian, U.S. and International tax specialist with several companies including: Deloitte SNC-Lavalin Transat PwC BCE Emergis YPG

3. About Velan Inc. Manufacturer of a broad range of industrial valves for use in most industry applications including power generation, oil and gas, refining and petrochemicals, liquefied natural gas and cryogenics, pulp and paper, geothermal processes, subsea and shipbuilding. Copyright © 2014 McGraw-Hill Ryerson, Limited. All rights reserved. 3

4. About Velan Inc. (continue..) Over $500 million sales and 2,000 employees worldwide. 16 manufacturing plants and 5 stocking & distribution centers in 10 countries.

5. Expansion to India – Why? India’s recent growth has led to an increasing need for electrical power. Indian government policies promote its utilities to use local rather than foreign manufacturers. Copyright © 2014 McGraw-Hill Ryerson, Limited. All rights reserved. 5

6. Expansion to India – Why? (continue..) Prices and delivery times for supplying the Indian market from existing plants were not competitive. Internal need to outsource certain head-office support services to low- cost jurisdictions.

7. Expansion to India – Constraints India is a high tax jurisdiction. – Effective corporate income tax rate over 40% vs. 27% for a Quebec-based company. India is a very bureaucratic jurisdiction. – Red tape and burdensome regulations. – Many different types of taxes (customs duty, excise, duty, central sales tax, state sales tax, transfer taxes). Strong foreign currency controls. – Indian businesses transacting with each other must use the Indian rupee. Copyright © 2014 McGraw-Hill Ryerson, Limited. All rights reserved. 7

8. Form of Investment – 2 Choices Cons: Worldwide sales into India from other subsidiaries may be “attracted” to the Indian branch resulting in increased taxes. Limited flexibility with tax planning. Does not solve local content or outsourcing issues. Copyright © 2014 McGraw-Hill Ryerson, Limited. All rights reserved. 8 Pros: Easy to set-up – less start-up costs Start-up phase losses can be used to reduce taxes on profitable Canadian operations Repatriation of profits are easier – No foreign currency controls. 1. Foreign Branch of Canadian Corporation

9. Form of Investment – 2 Choices Cons: Subject to foreign currency controls. Greater compliance costs and administrative burdens. No loss utilization in start-up phase. Copyright © 2014 McGraw-Hill Ryerson, Limited. All rights reserved. 9 Pros: More Indian sales opportunities due to local content. Simpler to offshore head office support services. Corporate veil. Easier to obtain local financing. Greater flexibility with tax planning. 2. New Indian Subsidiary

10. Expansion to India – Tax Considerations Minimize effective corporate income tax rate. – Debt push down – Transfer pricing Minimize taxes on repatriation of profits. – Dividend distribution tax of 16.995% Minimize indirect taxes. – Special economic zones (“SEZs”) Minimize taxes on future exit. – Not a concern for Velan Inc. Copyright © 2014 McGraw-Hill Ryerson, Limited. All rights reserved. 10

11. Expansion to India – Final Structure Copyright © 2014 McGraw-Hill Ryerson, Limited. All rights reserved. 11