GLOBAL EQUITY ORGANISATIONEMPLOYEE BENEFIT PLANS UPDATE

Presenter: Jeffrey LeesDirector Geo (Asia Pacific)

Tax Partner, Dibbs Crowther & OsborneDate: 30 November 2000

Introduction

Four Main Remuneration Strategies

Why Introduce an Equity Based Plan?

Developments in Asia Pacific Countries

Overview of Tax Compliance Issues

GEO Website

Remuneration Strategies

Salary & wages & bonuses – cash benefits

Fringe benefits

Superannuation – retirement savings

Equity based incentives

Why Introduce an Equity Based Strategy?

Align interests of employer with general employees

Assist with a change in culture/work ethic

Provide a platform for improved productivity

Supplement net national retirement savings

Assist employee buyouts & succession planning for small

business

Facilitate development of small medium and unlisted

sector

Developments in Equity Based Strategies in Asia Pacific

Singapore: “Entrepreneurial ESOP Scheme” Options granted on or after 1 June 2000 50% tax exemption on option gains of up to S$10M in

10 yr period Subject to conditions – both 50% tax exemption + 5

year deferral on tax payment on balance of 50% gain Eligible to only Singapore incorporated companies –

with M.V. of gross Assets <S$100M Eligible to employees working at least 30 hrs/week and

<25% of voting shares Vesting of options restricted:

• 1 yr from grant if exercise price = share value• 2 yrs from grant if exercise price <share value

Developments in Equity Based Strategies in Asia Pacific

Malaysia: “Simplification of Securities Regulation”

After 1 July 2000 Securities Commission approval required to issue any shares or options

Exception for shares/options of foreign incorporated co. SC approval is given if:

• Aggregate number of options/shares must be < 10% issued capital • Max number of shares or options per employee must be <500,000• Eligibility & allocation must be equitable amongst different categories of

employees• Exercise price of options in unlisted company can be at a discount to M.V.

of share• Exercise price of options in listed Company must not be <M.V. of share

Malaysia (cont’d):

• Foreign full-time contract employees can participate subject to limit of 20% exercise of options in any year

• Plan has a 5 yr time limit – subsequent renewal subject to SC approval.

Unlisted Company generally not encouraged to seek approval of SC to list within 1 yr of introducing any share/option plan

Existing options in unlisted Company must be exercised or cancelled before approval of SC to list.

Developments in Equity Based Strategies in Asia Pacific (cont’d)

Indonesia: “Securities, Regulation in Limbo”

“Public offerings” require prospectus filings Public offering required if total “value” of shares/options

>R$1billion and Offered through mass media; or Offered to >100 people; or Results in purchase of securities by >50 people

Use of “co-operative association” = 1 person Public offering of options in foreign companies may require

custodian bbank and listing of Indonesian depository receipts BAPEPAM acknowledge law is inappropriate

Developments in Equity Based Strategies in Asia Pacific (cont’d)

Developments in Equity Based Strategies in Asia Pacific (cont’d)

New Zealand: “Interest free loan plans”

Approval required – strict conditions Fully paid shares acquired with interest free loan Shares can be offered at a discount Employee cannot deal with share for min. 3yrs, max.

5yrs Limit of NZ$2,340 value of shares per employee in any

3yr period Advantages:

• Employer gets deduction for notional 10% interest• Employee not assessed on loan or discount• Suitable with high turnover of staff• No Prospectus required

New Zealand: “Interest Free Loan Plans” (cont’d) Disadvantages:

• Participation must be all fulltime employees• Limited value can be given

Discount share/option purchase plan No approval required Employee taxed on discount given – only at time share acquired

(option exercised) Advantages:

• Participation can be selective• No limit on value of options/shares• Restrictions can be imposed on employee• Discount up to 33% can be exempt

Disadvantages:• No deferral of taxing point beyond acquisition• 8yr restriction required for exemption on discount• Prospectus required unless exempted

Developments in Equity Based Strategies in Asia Pacific (cont’d)

Developments in Equity Based Strategies in Asia Pacific (cont’d)

Australia: “Trends”

Share Options: becoming subject to performance hurdles Use of interest free loans for exercise is popular

Fully paid shares given on performance or tenure Salary sacrifice now more attractive on share purchase

plan – future CGT discount available Electing to be taxed up front on options does not qualify

the share acquired on exercise for CGT discount Deferal of annual cash bonus paid in free shares Share ownership guidelines for executives SAR agreements for annual bonuses