Solutions for private equity managers investing into Africa Simple structuring for raising capital from institutional investors

Africa has become increasingly attractive to investors, providing opportunities largely in the infrastructure, technology, agriculture and financial services sectors. However, despite Africa’s investment potential, many institutional investors need an additional layer of comfort before committing capital to your structure. By introducing a Jersey and Mauritius element to your fund, you can take advantage of Jersey’s status as a leading offshore financial centre - well regulated, ease of business and familiar to global investors - while benefiting from Mauritius’ substantial network of treaties with surrounding African countries, and its Investment Promotion and Protection Agreements to safeguard your assets from conflict or riot.

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How does it work? Whether for structuring your private equity, infrastructure or exchange-traded fund (ETF) investments, common issues face by managers investing into Africa include:

INVESTORS

–– Tax efficiency in structuring –– Access to capital markets –– Safeguarding underlying assets.

JERSEY

MAURITIUS

Structuring your fund in Jersey with a Mauritian element can help address the above risks. Jersey remains the largest offshore jurisdiction for London Stock Exchange (LSE) listings, an exchange commonly used for exit strategies or to list African ETFs. Jersey also provides increased access to capital markets, being frequently used by global investors due to its ranking as one of the best regulated offshore financial centres and listing on the OECD White List. Using Mauritius for the holding company for direct investment into Africa offers a series of benefits such as tax treaties and the investment promotion and protection agreements with Africa, providing asset protection and compensation for losses triggered by conflict and other factors. Flexible structuring options are also available using Mauritius for Asian or African investors looking to subscribe into the fund. In practice, global investors will subscribe into the Jersey fund taking advantage of Jersey’s reputation, substance, regulatory regime and market access. Capital will then flow to the Mauritius entity, before ultimately streaming to the African portfolio company. For returning capital, African capital gains taxes are generally levied at a rate of 30%. Through use of this structure, the Mauritius tax treaties should restrict gains tax to the country of residence of the seller of the assets, which in this case would be Mauritius and so subject to a 0% gains tax. Funds then flowing upwards to the Jersey structure will not be subject to Jersey tax.

AFRICA

In structuring the above, we can provide a wide array of administrative services and connect you with the appropriate parties to help facilitate your investment into Africa. If you have an existing service provider in place, we can partner with them.

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Structuring in Jersey Choosing where to domicile your fund can have a significant impact on potential investors and your ease of doing business. Jersey has a regulatory regime that is fast, transparent and cost effective. It offers tax neutrality and provides access to capital markets for global investors. Specific considerations for Jersey include: Raising investor capital Jersey offers a safe and familiar business environment for investors and intermediaries. Many competing jurisdictions lack sufficient transparency which results in additional due diligence requests from investors, and in turn are less appealing. Substance Jersey has a track record of proving substance and compliance. We are accustomed to providing the systems and infrastructure needed to evidence your offshore operations. Opening bank accounts Jersey benefits from an AA credit rating from S&P and many of the world’s largest banks including Standard Bank and Nedbank have a presence on the island. Market access Jersey provides access to European and other foreign investment markets through offshore listings on foreign exchanges and so offers potential liquidity that is not available in domestic markets or with other offshore jurisdictions. Jersey can facilitate a listing 4

on the LSE, Euronext, Irish Stock Exchange (ISE), New York Stock Exchange (NYSE), or even the Channel Islands own specialist market (CISE). Other benefits: –– Tax neutrality and 0% corporate tax –– No stamp duty on transfer of shares –– Access to capital markets (LSE and Jersey shares can trade on CREST) –– Meets the market access requirements under AIFMD –– Included in the OECD White List –– Jersey has a tax information exchange agreement (TIEA) network with various jurisdictions including South Africa –– Double taxation agreement negotiations are in advanced stages with Botswana, Ghana, Lesotho, Malawi, Mauritius, Nigeria, Seychelles, Swaziland and Zambia –– The Jersey Financial Services Commission has a memorandum of understanding with the Bank Supervision Department of the South African Reserve Bank and the Financial Services Board of the Republic of South Africa –– Jersey is the largest offshore jurisdiction by market capitalisation for listing companies on the LSE.

While Jersey can assist with raising capital, Mauritius has a wealth of experience in working with investors to place capital into Africa.

Using Mauritius While Jersey can assist with raising capital, Mauritius has a wealth of experience in working with investors to place capital into Africa. Its ‘global business platform’ allows fund managers to structure their investments while taking advantage of a large network of tax treaties. With over 40 tax treaties signed to date, Mauritius has preferential access to African and Indian Ocean markets and holds membership in the Indian Ocean Commission, the Indian Ocean Rim Association for Regional Co-operation, the Common Market for Eastern and Southern Africa and the Southern African Development Community. As the only offshore jurisdiction with membership to all major African regional organisations, Mauritius also benefits from:

To take advantage of its large network of tax treaties, funds need to be structured as GBC 1 companies which are regulated by the Mauritius Financial Services Commission. Local Mauritian requirements for GBC 1 companies include: –– At least two resident directors in Mauritius –– Holding board meetings with at least two directors from Mauritius –– Maintaining a principal bank account in Mauritius –– Maintaining accounting records at your Mauritius registered office –– Having audited financial statements prepared in Mauritius.

–– No local capital gains tax or withholding taxes –– No limit on carrying forward of local tax losses –– No local stamp duties, registrar duties or levies –– Free repatriation of profits and capital –– African investment are exempt from onshore capital gains –– African tax treaties limit the withholding tax on dividends.

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Fund management thrives on raising investor capital. Structuring in Jersey provides an element of familiarity for your investors and ‘ticks the risk box’ for many institutional investors who might not otherwise invest. The additional capital raised is likely to be significantly greater than the cost of using Jersey as a domicile.

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Who we are

How we can help

We are Capita Asset Services, the financial services division of Capita plc which is a an LSE listed, FTSE 100 and Eurotop 300 company, ranked in the Forbes top 100 of the world’s most innovative companies in 2014 and 2015.

Our Private Equity and Infrastructure teams in Jersey have extensive experience in administering offshore funds investing into a wide range of products and jurisdictions. We understand the local Jersey regulatory framework and so can take care of this on your behalf.

Our operations are based in the UK, Ireland, Jersey, mainland Europe and India and we have 7,300 professional staff dedicated to making your life easier by creating efficiencies for your organisation.

–– Fund accounting and administration

We have over 40 years’ experience in the funds industry and are dedicated to building and maintaining strong partnerships to align our service offering with your business needs.

–– Compliance staff and ongoing support

With a range of services that combine our specialist knowledge with the backing of a FTSE 100 company, we are committed to supporting asset managers and controllers of financial assets. In an everchanging regulatory environment you can rely on us to provide expert solutions that help you successfully grow your business.

In structuring your vehicle through Mauritius it is important you demonstrate effective management and control to the local regulator. We work with a network of partners and advisors to assist clients structuring through Mauritius and Africa. Our partners will service your needs from local formation and provision of directors, through to advisory on your investment management activities including investment selection and local opportunities.

Our array of services includes: –– Registered office –– Company secretarial –– Directors and trustees –– Custody and depository services –– Registrar and transfer agency –– Management company services –– AIFMD, risk and portfolio administration –– Annex IV reporting –– Listing support on recognised exchanges.

Clients we administer from Jersey include: –– Two large multinational oil and gas exploration companies listed on the LSE and investing into Africa. –– A FTSE 250 company listed on the LSE and investing into Asia and Africa. –– A private company investing into South African real estate

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Contact us Aidan O’Flanagan Director & Head of Fund solutions t: +44 (0)1534 847 201 e: [email protected]

This material is for general information only. It does not constitute professional advice. Capita Asset Services is a trading name of Capita Fiduciary Group Limited and some of its direct and indirect subsidiaries and affiliates which are licensed and regulated by the Jersey Financial Services Commission for the conduct of trust company business and/or fund services business or as permit holders pursuant to the Collective Investment Funds (Jersey) Law 1988.

Ken Ritchie Senior Manager, Fund solutions t: +44 (0)1534 847 222 e: [email protected]

www.capitaassetservices.com FS15098