tmf group - building bridges to china: part 1

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Building Bridges to

China

28 September 2012 - Chester Beatty Library

Building Bridges to

China

Jochum S. Haakma

Global Director of Business Development, TMF Group

PART 1

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Building Bridges to

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Building Bridges to

China

Jochum S. Haakma

Global Director of Business Development, TMF Group

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Building Bridges to

China


Building Bridges to

China

Kieran Desmond

Regional Director, UK, Ireland & Channel Islands, TMF Group

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Building Bridges to

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Building Bridges to

ChinaThe Hangzhou Bay Bridge

Costing $1.7bn, the S-shaped 36km-long Hangzhou Bay Bridge is the longest ocean-crossing bridge in the world. It shortens the journey between Shanghai and Ningbo by 75km

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Building Bridges to

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Building Bridges to

ChinaEstablishing a Foothold in China Outsourcing Success Stories

Kieran DesmondRegional Director

TMF Group

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Building Bridges to

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Building Bridges to

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Setting up and supporting your foreign entities

Our Corporate Services

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Building Bridges to

China TMF Group’s Global Reach

Netherlands, Belgium, Luxembourg, United Kingdom, Jersey, Guernsey, Ireland, Germany, Liechtenstein, Denmark, Sweden, Finland, Norway, France, Switzerland, Italy, Spain, Malta, Austria, Poland, Czech Republic, Slovakia, Hungary, Slovenia, Bulgaria, Croatia, Romania, Serbia, Ukraine, Russia, Kazakhstan, Turkey, Cyprus, Israel, United Arab Emirates, Mauritius, South Africa, Venezuela, Colombia, Brazil, Ecuador, Peru, Bolivia, Chile, Paraguay, Argentina, Uruguay, Mexico, Guatemala, Honduras, El Salvador, Nicaragua, Costa Rica, Panama, Dominican Republic, Canada, United States, Aruba, Bonaire, Curaçao, British Virgin Islands, Cayman Islands, Jamaica, Bermuda, China, Hong Kong, Japan, Thailand, Singapore, Philippines, Vietnam, Malaysia, Labuan, Taiwan, India, Australia, New Zealand, Samoa.

100 Offices – 75 Countries

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Building Bridges to

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Building Bridges to

ChinaSample of our Global Clients

35,000 clients including over 50% of of Fortune 500 & FTSE 250 companies

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Building Bridges to

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Building Bridges to

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TMF Expansion Plan in China

TMF Group’s Competitive Advantages

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Building Bridges to

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Building Bridges to

ChinaTMF Group – what makes us unique?

ONE Firm – solely focused on helping clients do business internationally Global Reach - more than 100 offices in over 75 countries Independent – a wider range of services for clients, including offering local

directors or managing bank accounts and local payments

Helping business to seamlessly operate across borders

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Building Bridges to

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Building Bridges to

China

Provide expert local delivery and central control of all accounting, corporate secretarial and HR processes to ensure your business is fully compliant wherever you are doing business

Enable you to accelerate and control your global expansion by leveraging our corporate platform with minimum start-up investment

Transparency of your global accounting and corporate data

Reduce RiskReduce Risk

Reduce local corporate compliance, finance and administration costs Reduce the risks of late filings and so avoid penalties and interest payments Consolidate service providers to give better value for money Completeness of worldwide bookkeeping and reporting can reduce audit fees

Control CostsControl Costs

One provider for all countries where you are operating Single point of contact so all communications are efficient and co-ordinated Provide consistent and robust accounting and reporting across the world Consolidated reporting on all entities - a clear view of your global performance Enable your management team to focus on your core business Single global contract and billing arrangements

Simplify OperationsSimplify Operations

How We Help Clients

3 drivers to help our clients succeed globally

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Building Bridges to

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Building Bridges to

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Global reach We have more than 100 offices in over 75 jurisdictions worldwide and we can offer our services in the countries where you operate

Local delivery Services from in-country specialists with in-depth knowledge of local rules and

regulations, understand local practice from different cities Close working relationship with local government authorities in different cities To capture practical variations from different cities in China by China network, KPO

Central coordination As a true group (not a franchise), TMF is able to provide central

coordination, allowing for control and visibility, with a single pointof contact

Full scope TMF Group provides a comprehensive range of corporate administrative outsourcing services, including financial, legal, and HR administrative services

No conflicts As an independent services provider, TMF Group can provide the full scope of corporate administrative services, and can work with any bank or advisor of the clients’ choice

Track record Excellent client ratings and retention

TMF compliance TMF Group adheres to strict internal and external compliance procedures Client Acceptance and KYC procedures supervised by the Group Compliance

Center

TMF Group Competitive Advantages

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Building Bridges to

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Building Bridges to

ChinaCase Study – Controlling Client Spend

TMF saves client up to 25% on outsourced global bookkeeping as it expands

Our client provides analytical studies on sales for retailers

The firm operates in 22 countries around the world, employing local admin staff

How we helped TMF Group reviewed the costs of outsourcing its back office functions

This saved the client over 20% of its costs

TMF Group now manages 40 countries in total for the firm

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Building Bridges to

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Building Bridges to

ChinaCase Study – Simplifying Operations

TMF takes over the complexities of administration and compliance for an international fund client

Our client manages real estate funds for retail, office and private properties in Europe

This necessitated the need to create numerous fund holding, asset and management entities across multiple territories, compliant with varying regulations

How we helped TMF’s international teams took over the bookkeeping, accounts preparation,

consolidated accounts, VAT and tax compliance work, with a single point of contact

This enabled the client to cut its back-office admin headcount and to reduce the costs and inefficiencies of having multiple service providers

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Building Bridges to

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Building Bridges to

ChinaCase Study – Simplifying HR Compliance

TMF ensures international compliance on staff hiring and salary payments for global media group

Our client is a global media company with over 9,000 staff in 108 territories

This required a complex understanding of the local rules and obligations in each country, and careful co-ordination of payroll management

How we helped TMF took over all processes and payments through the client’s SAP accounting

system, with all approvals managed online

This gave the client clarity and control over its HR processes, as well as assurance that it is fully compliant in all countries

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Building Bridges to

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Building Bridges to

ChinaCase Study – Reducing Service Providers

Our global Corporate Secretarial service consolidates an insurer’s service providers – giving transparency and lower headcount

Our insurance client is expanding its business globally, growing the number of legal entities from three to 50 within two years

The firm was using multiple service providers, external lawyers and in-house staff to track entities, filing obligations, directors, shareholders and certification

How we helped TMF’s corporate secretarial teams took over all legal administration, with a single

point-of-contact, including implementing an internet-based database of all records

This enabled the client to reduce the number of service providers down to one, control its in-house legal staff headcount and improve local compliance

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Building Bridges to

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Building Bridges to

ChinaCase Study – Compliance for the Last Mile

TMF local offices and experts in accounting and statutory reporting take care of client’s shared service center ‘last mile’

Our client is a global drinks manufacturer with a shared service centre for account transaction processing and closing books in 16 countries

In consolidating finance into a single centre, the firm had lost the local knowledge and resource to report in each territory – the ‘last mile’

How we helped TMF’s offices, linked to the client’s SAP system, were able to take on local accounts

conversion, annual statutory reporting, VAT and CIT filings

This meant the client did not have to manage multiple service providers, worry about co-ordination or the quality of local compliance

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Building Bridges to

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Building Bridges to

ChinaCase Study – Accelerating Client Growth

Our client is a successful domestic provider of facilities management services

In 2010 the firm was invited to pitch for a global contract with an existing customer, but it had no foreign corporate structures or employees to fulfil the opportunity

How we helped TMF’s global office and expert platform enables the client to set up and close down

local branches as its customer demands

This gives our client the flexibility to expand (or contract) with limited risk or spend

TMF now provides local accounting, consolidated reporting and payroll services

Client uses TMF’s global platform to accelerate its growth and reduce the risks of international expansion

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Building Bridges to

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Building Bridges to

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Outsourcing:

Why it is such a key strategy for expanding to China?

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Building Bridges to

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Building Bridges to

China The Chinese Challenges

1. Business Risks

3. Control & Expense

2. Regulatory Burden

China is booming, but presents serious challenges for local and foreign businesses

The distractions of managing the above risks and burdens Gaining transparency on business performance Ensuring all policies and procedures are consistently applied Expense and risk of investing in a local accounting and

administrative workforce

Rising employment costs and business inflation Increasing competition Human resources constraints – hiring and retention

Understanding the state and 33 regions’ varying rules Selecting the right investment structures Business license applications and delays Complex tax regime with risks of excessive liabilities Convoluted customs clearance and trade regulations

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Building Bridges to

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Building Bridges to

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Corporate presentation

Some key findings from the China Business Report (2011-12) conducted by AmCham in Shanghai …

78% of companies surveyed report they are “very profitable”

80% of companies surveyed report revenue growth in 2011 over 2010

51% of companies surveyed state their operating margins improved

67% of companies surveyed report their China revenue growth is higher than

revenue growth generated worldwide

Top 3 business challenges: (1) costs (2) human resources & (3) competition

No significant improvement in legal and regulatory barriers - 71% said either staying

the same or deteriorating.

China

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Building Bridges to

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Building Bridges to

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Corporate presentation

China: Market Challenges (AmCham Business Report 2012)

Top Business Challenges:

1. Rising Costs

2. HR Constraints

3. Increasing competition

Top Regulatory/Legal Challenges:

1. Bureaucracy

2. Unclear regulatory environment

3. Lack of government transparency

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Building Bridges to

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Building Bridges to

ChinaChallenges for Foreign Companies in China

CEIBS Survey 2012

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Building Bridges to

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Building Bridges to

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TMF Expansion Plan in China

TMF competitive advantages

Outsourcing:WWWWH

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Building Bridges to

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Building Bridges to

ChinaReasons to Outsource

Reduce and control operating costs Improve company focus Gain access to world-class capabilities Free internal resources for other purposes Resources are not available internally Accelerate reengineering benefits Function difficult to manage/out of control Improve efficiency of allocating scarce capital Mitigate/ share risks

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Building Bridges to

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Building Bridges to

ChinaEvaluating Outsourcing Services?

Client Requirement

Individual Advisor’s Capabilities

Market Experience of Firm or Individual Advisor

Firm’s Capabilities

Specialist skills Technical know-how

Market know-how Solutions know-how

Intellectual horsepower

Independence, creative thinking and problem solving

Facilitation and communication

Information and analysis

Execution and implementation

Speed Energy and momentum

Road map

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Building Bridges to

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Building Bridges to

ChinaFactors that Support Successful Outsourcing

Alignment with your company’s goals and objectives Clear outsourcing strategy and implementation plan Selecting the right outsourcing partner Ongoing management of the outsourcing relationship – use a

scorecard Properly structured contracts Open communication with any affected internal staff Senior executive support and involvement Near term financial justification

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Building Bridges to

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Building Bridges to

ChinaChoosing an Outsourcing Partner

Capabilities – differentiation from competitors, specialist skills Commitment to quality and service Competitive pricing - highest delivered value References/reputation - client list Responsiveness, flexibility Flexible contract terms Scope of resources Real value-added capabilities Cultural match Existing relationship Location, geographic footprint, size

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Building Bridges to

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Building Bridges to

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Professional Services Outsourcing in China

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Building Bridges to

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Building Bridges to

ChinaChinese Government’s1000-100-10 Project

In 2006, the Chinese government announced the 1,000-100-10 project whereby it aimed to create/attract 1,000 local Chinese outsourcing companies, 100 world-class outsourcing companies and to establish 10 key cities as the location of choice for the outsourcing industry.

The results rapidly exceeded expectations….. In February 2009, the Chinese government designated 21 "Service

Outsourcing Model Cities” and each of the cities implemented a range of policy measures to promote the local service outsourcing industry.

The balance between manufacturing and services activities in China will shift gradually from 60/40 to 40/60.

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Building Bridges to

ChinaChinese Cities - Industry Focus

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Building Bridges to

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Building Bridges to

China

About China & TMF China

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Building Bridges to

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Building Bridges to

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For each of the last fifteen years China has been the recipient of between USD 65 – USD 110 billion per year in foreign investment.

China invested nothing in Brazil in 2009, but by 2010 was the largest foreign investor with over USD 20 billion in foreign investments

Retail sales across the country increased by 14% last year as the market shifts to a focus on internal consumption. TMF is at the heart of this growth, helping retailers to accelerate their store opening programs across the country

China: 15 Years+ of Rapid Growth

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Building Bridges to

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China is now the world’s second largest economy, having overtaken Japan recently

Every quarter the growth in China exceeds the annual GDP of Greece, and every year the GDP of Spain

The country has experienced almost two decades of economic growth exceeding 10% per annum

Chinese growth is expected to be around 7% in 2012. Growth in central and western China continues to race ahead in double-digit figures

In the coming years the Chinese economy will become the world’s largest, overtaking the USA.

China: 15 Years+ of Rapid Growth

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Building Bridges to

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Building Bridges to

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TMF’s Core Services Offering in China

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Building Bridges to

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Building Bridges to

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Administration Transaction-Based Services Value Added Services

Bookkeeping, Accounting & Reporting

Preparation of voucher and processing of accounting data

Bookkeeping and Reporting Disbursement processing Tax filing and payment Tax invoicing process

Group reporting, IFRS / USGAAP vs PRC GAAP

Internal Control – Implementation / Ongoing review and maintenance

SOX compliance Pre-IPO accounting support Inventory count – Cycle or Annual Provision of interim accountant or

account manager

Corporate Secretarial & Legal Administration Support

Incorporation / Deregistration Administration for change of

company particulars Annual filing / Annual examination

Company restructuring Health check for completeness,

timeliness and correctness Ongoing maintenance of statutory

records and information in TMF database

Provision of interim / nominated legal representative / director/supervisor

Human Resources & Payroll Services

Payroll calculation Individual IIT filing Work Permit and Visa application

Social security administration Recruitment Training Staff Performance / Retention Assessment and Development

The Core Service Offerings in China

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Building Bridges to

ChinaLabour Leasing/ Nominee Employer Services

Nominee Employer services enables our clients to enter new markets quickly and/or to operate in a specific market without the administrative/compliance burden of maintaining their own local entity.

Employer without establishment (Europe) - registering the client’s foreign client entity as a local/in-country employer, whereby TMF carries out the registration and the ongoing payroll for the local employees. Focus on tax considerations.

Special Purpose Company acting as employer - In certain countries, the SPE will need to obtain a license for the provision of nominee employer services. Indemnification required for TMF.

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Building Bridges to

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Building Bridges to

ChinaTrade Support Services – Hong Kong

Order Processing Capture data from client systems and process purchase orders

Shipping Arrange shipping and check letters of credit Liaise with Hong Kong bankers to transfer letters of credit to manufacturers Deliver samples to clients and arrange factory visits Arrange import / export declarations with Customs and Excise

Documentation and Back-office Support Prepare documentation for bills of ladings, documentation required for letters of credit,

and follow-up documents post-shipment Communicate with manufacturers, report net proceeds upon completion of

transactions, and move funds according to instructions

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Building Bridges to

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Building Bridges to

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95% of TMF's clients in China are global corporations and foreign investors coming into China. They include manufacturers, and companies involved in retail, commodities, energy, transport, and IT and communications.

“Many companies were initially attracted to China as a low-cost manufacturing base and a place to grow B2B services. However, as China's economy matures and its population becomes more prosperous, they now find they have the world's largest consumer society on their doorstep. “Whichever way you look at it, it's a winner.” - Ernest Wong, MD TMF China

Who are TMF China’s Clients?

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Building Bridges to

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Building Bridges to

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TMF Group’s Expansion Plans in China

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Building Bridges to

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Building Bridges to

ChinaTMF China in 2009

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Building Bridges to

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Building Bridges to

ChinaTMF China in 2011–2012

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Building Bridges to

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Building Bridges to

ChinaTMF China in 2013 - 2014

We have been helping businesses succeed in China since 2005

Ten offices today, expanding to 25 by 2014

Our SSC in Chengdu provides low-cost processing for clients

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Building Bridges to

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Building Bridges to

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Dalian

Shanghai

Tianjin

Beijing

Guangzhou

Hong Kong

Chengdu Chongqi

ngWuhan

Shenyang

Xiamen

Xi’an

Suzhou

TMF China in 2014

Shenzhen

Qingdao

Harbin

Fuzhou

Zhengzhou

Hefei

Changsha

Ningbo Hangzhou

Wuxi

Nanjing

Jinan

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Building Bridges to

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Building Bridges to

China

Now

Hong Kong Beijing Shanghai Tianjin Qingdao Chengdu (SSC) Chongqing Guangzhou Shenzhen Shenyang Wuhan

2013/4

Dalian (SSC) Suzhou Jinan Harbin Nanjing Wuxi Ningbo Xiamen Fuzhou Hangzhou Changsha Hefei Zhengzhou Xi’an

By end-2014

25 offices in China

Over 700 employees

2 Shared Services Centres (SSC):- Chengdu- Dalian

TMF Group’s Expansion Plans in China

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Building Bridges to

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Building Bridges to

ChinaFocus on Chengdu

Capital of Sichuan, 14m people growing by 15% annually. Home of the Panda

150,000 Foxconn employees built more than 40m iPads in Chengdu last year

51 colleges and universities in the city, with almost 600,000 students on campus and 120,000 graduates every year

Currently 100+ employees in Chengdu and growing fast

Chengdu will be the primary hub for TMF China’s 25 offices in 2014/5

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Building Bridges to

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Building Bridges to

ChinaChengdu SCC and its Satellite Offices

Initially, a typical satellite office consists of small office with a meeting room, supported by a local Client Relationship/Compliance Manager and a Business Development Manager, plus two or three additional staff.

Each satellite office also has a dedicated team of 10 or more staff in the SCC who perform the actual client work, which is coordinated by the Relationship Manager.

How the SCC and satellite offices work together

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Building Bridges to

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Management by global business line

Global client account management

Management by country and region

Common software platforms

Performance management controls

How TMF Group Integrates its Global Service Offerings

MA

TR

IX M

AN

AG

EM

EN

T

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Building Bridges to

China China Summary

TMF China understands the regulatory burden and business risks of expanding in China

Our impressive reach across the country is growing fast

Our local knowledge and global reach means simplified operations for you

A single point of contact from anywhere in the world gives you control and transparency

We can help you succeed in China

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Building Bridges to

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China Case Studies

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Building Bridges to

China China Case Study 1

Our North American client, a global retailer, for which we have been providing outsourced accounting and payroll services for many years across the world.

In 2010, they launched an aggressive organic expansion plan into mainland China, launching from their Hong Kong base.

How we helped

TMF’s offices around the country were able to quickly register the retailer with all the relevant provinces’ tax authorities prior to the set-up of local shops, and ensure their business was authorized to employee local staff.

This meant our client was able to focus on store openings and securing their supply chain without the burden of regional administrative tasks.

North American branded retailer launches multiple Chinese stores

Accelerating Client Growth

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Building Bridges to


Brazilian manufacturer establishes Chinese production JVs

Our Brazilian client is an automotive parts manufacturer.

In 2011 it struck a JV agreement with a Chinese manufacturer to produce local parts for the Brazilian company’s expanding car retailer customer.

How we helped

TMF took on the set-up of the local Representative Office, providing corporate secretarial support in Shanghai.

We helped with import and service license applications.

In addition, we managed the hiring and administration of the small local workforce, including Brazilian expatriates.

Controlling Client Spend

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Building Bridges to


Industrial company restructures China operations

A global industrial client with numerous plants in China was reorganizing to take advantage of new investment incentives in one of the many Chinese free trade zones.

This included restructuring more than 80 legal entities in mainland China.

How we helped

TMF’s local experts helped review the entire structure, including holding, WFOE, JV and RO entities.

They were able to then close entities no longer required, and register new companies to enable the client to facilitate trade and take advantage of the new tax incentives.

Simplifying Operations

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Building Bridges to

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Platform Solutions

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Building Bridges to

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Building Bridges to

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Leave Applicationn-line

Commission Information

Productivity

Human Resource Dash Board

Platform Solutions - Payroll

Employer Information

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Building Bridges to

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Building Bridges to

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Leave ApplicationOn-line

Commission Information

Personal Profile Appraisal result

Platform Solutions - Payroll

Employee Portal

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Building Bridges to

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Building Bridges to

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Company review Conflicts manager

ISAE 3402 (SAS 70)

Back-up recovery

Provide periodic review and validation of data library

Send periodic email reminders to notify reviewers to check completeness

Accurately oversee the activities of subsidiaries

Provide periodic review and validation of data library

Send periodic email reminders to notify reviewers to check completeness

Accurately oversee the activities of subsidiaries

Ensure company has procedures to deal with conflicts of interest

Record any directors’ conflicts of interest, including 3rd party benefits and connected persons

Ensure company has procedures to deal with conflicts of interest

Record any directors’ conflicts of interest, including 3rd party benefits and connected persons

Adheres to the IASE3402(SAS70) Type II standard protocol

IASE3402(SAS 70) process assures that we meet the highest standards for security and have the appropriate controls and security in place







Platform Solutions - CoSec

O & R Management

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Building Bridges to

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Company Profile Group Structure Audit TrailManagement Report

Platform Solutions - CoSec

Facilitation

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Building Bridges to

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TMF China Support

TMF Offices in China

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Building Bridges to

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Building Bridges to

ChinaTMF Group

Operating or expanding globally?

TMF Group helps to reduce the risks and to control the costs of doing business across borders

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Building Bridges to

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Building Bridges to

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Thank You!

tmf group - building bridges to china: part 1

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