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Helping public companies and their suppliers deliver better and more cost-effective programs since 1994

Difficult Times Call For Drastic Measures

An Interview with Eric van Aalst and Kevin Penzien of CITCO

Recently, we sat down with Eric van Aalst and Kevin Penzien of Citco Corporate Services Inc. (part of The Citco Group of Companies, “Citco”) to talk about the ways their clients are coping with the current global economic environment in terms of foreign subsidiary management.

Q: Both of you have substantial contact with a large number of public companies based in various states of the U.S.A. What trends have you observed recently?

With an economy that is now recognized as in recession, there is tremendous pressure on corporate America to cut costs. Also, a relatively weak US dollar has made it significantly more expensive for US public companies to engage foreign legal counsel for “routine” corporate secretarial matters or to recruit their own legal support staff overseas. In particular, the strong Euro has forced US public companies to keep a close eye on their legal expenses in Europe (whether internal or paid to outside counsel). Furthermore, many companies have imposed hiring freezes and other measures that make it challenging for Corporate Secretaries and General Counsels to operate their departments effectively.

Q: Understood, but doesn’t a weak economy adversely impact Citco’s business as well?

Not necessarily, since the current economic environment forces in-house counsel to critically examine existing processes and re-tool them if required. In many cases, it turns out that corporate secretarial work relating to foreign subsidiaries of US public companies can be done much more cost effectively by Citco than by internal staff or by foreign legal counsel.

At a minimum, engaging Citco to handle foreign corporate services can be budget neutral. But in many cases we actively work with our Fortune 500 clients to reduce the costs of managing their portfolios of overseas subsidiaries. Since we offer our clients a very scalable outsourcing option for corporate services, they have a much better handle on overall compliance costs than in cases where they would engage foreign legal counsel. For most annual maintenance work connected with foreign subsidiaries, we charge on a fixed fee basis and we often agree on annual all in fees with our Fortune 500 clients for their total portfolio of overseas subsidiaries.

Q: Outsourcing to trim costs sounds like a very smart option these days. What is your biggest challenge in growing your business?

One of the biggest challenges is to have our clients quantify the total costs of their international subsidiary management. In many cases no such quantification has been done and many costs associated with subsidiary management are either hidden in the bills of foreign legal counsel for transactional work or are paid by overseas offices of the multinational company. Thus, they become essentially “invisible” at corporate headquarters in the USA.

Also, US public companies typically do not put a dollar amount on the extra time that is spent by their staff because of inefficiencies in their dealings with a multitude of foreign law firms and other agents they use for foreign filings, document retrieval and transactional matters. The ‘one point of contact’ that the Citco global client desk offers public company clients frees up valuable time for the Corporate Secretaries and their departments – time they can then

Q: It seems like a “no brainer” – and very sound business practice to me – to re-visit existing processes in a time of recession and to outsource functions to generate cost savings wherever one can.

You are absolutely right. And many US public companies are actually going through the exercise that you have suggested and are working with us to actively reduce costs of their foreign subsidiary management. When clients outsource functions to Citco, we, in essence, become an extension of their organization. We work closely with the Corporate Secretarial Department to ensure that foreign subsidiaries are kept in good standing, filings are done on a timely basis and business processes run efficiently. In terms of business process, it’s important to note that we provide a full range of accounting and reporting services and can also assist with the provision of temporary staff, dedicated office space, and other business process outsourcing in foreign countries.

Q: Does Citco cover the whole world these days?

As you know from interviews in previous years, we have steadily added offices to our global network of self-run operations to accommodate the expanding needs of our Fortune 500 clients. There is no single organization with offices in every country around the world, but our modus operandi allows us to effectively cover most of the jurisdictions where our clients need our services.

We offer our public company clients a “single point of contact” through our global client desk, which then interfaces with our own offices around the world – as well as an established network of highly experienced agents in countries where we do not yet have an office presence – in order to execute the requested service. At the end of the day, Citco will monitor all work and ensure the quality of our service. This model is very similar to the modus operandi of international law firms who subcontract with overseas agents and local counsel where necessary. But the main benefit we offer our public company clients – other than the single point of contact – is the cost savings, since we have a fixed-fee pricing model and significantly lower fees for foreign corporate secretarial services.

Q: Where has Citco added to its international network in recent years?

Australia, Brazil, Japan and Uruguay have been added and we are in the process of expanding our footprint in Asia and elsewhere in Latin America.

To complement our representative offices in New York City and Miami, we have also based a client representative in San Francisco for clients based on the West Coast. Clients are encouraged to visit our website (www.citco.com) to receive up-to-date information about our services and office locations.

Q: So how, exactly, do clients interface with Citco?

Just like in any other type of modern business, most client interaction takes place these days via e-mail. Between our US offices and our global client desk, clients have 24/7 support for their global corporate secretarial needs. As our clients will confirm, the responsiveness of Citco is unsurpassed. We will happily provide client references upon request. This high degree of satisfaction is a result of the long tenure of our staff, as well as the time that we have invested to train them. Remember, Citco has been providing international corporate services for over 65 years and is still owned by its founding family. We take a long term view and the quality of our staff is a direct reflection of the vision and the values of our organization.

Q: How can multinational public companies learn more about Citco and its services?

In addition to a visit to our website (www.citcotrust.com), we hope they will contact one of us directly. The e-mail addresses of our US representitives are: evanaalst@citco.com (Eric van Aalst, New York City) kpenzien@citco.com (Kevin Penzien, San Francisco) and wsarries@citco.com (Walter Sarries, Miami).

Citco’s history and the scope of its global services

The Citco Group of Companies (“Citco”) began at the outbreak of World War II, when Dutch multinational companies were under the threat of having their corporate headquarters fall under enemy control and their assets subject to seizure. Our founder Mr. A.A.G. Smeets - then a lawyer and civil law notary in Curacao in the Netherlands Antilles - provided urgent assistance to these firms by relocating their official corporate headquarters to the Netherlands Antilles in order to protect their assets.

For over 65 years, Citco has been assisting multinational corporations with a broad range of corporate, accounting and reporting services to help them manage their international subsidiaries, using a network of dedicated staff members around the world. Citco’s independence, our decades of experience, our global reach, and our impressive Fortune 500 client list speaks to our reputation for quality service and industry leadership.