TRUST AS AN INVESTMENT PURPOSE VEHICLE

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TRUSTAS AN INVESTMENT PURPOSE VEHICLE
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MAIN CHARACTERISTICS OF A TRUST ACCORDING TO
ECUADOREAN LEGISLATION
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Formation of an autonomous patrimony

• With the moneys or goods which are delivered when
  performing a mercantile trust contract an
  autonomous patrimony ( equity isolated ) is
  formed which is administered by the Fiduciary,
  but without the Fiduciary being the absolute
  owner and which is separated from the patrimony
  of his client.
• With certain exceptions, this separation protects
  the patrimony from the Trustees creditors.

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Absolute separation of goods

• The Fiduciary never acquires the absolute
  ownership of the goods received. It is obligated
  to keep a total separation between its own
  patrimony and the goods it administers for its
  clients.

• The Fiduciary carries independent accounting for
  each of the businesses and for its own patrimony.

• Different from other type of businesses, the
  valuables which the clients transfer to a
  Fiduciary never get mixed up with the patrimony
  of the fiduciary company.

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Legal Framework And Regulatory Control

• Stock Market Law .
• Controlled by the Regulator of Non Financial
  Corporations (Superintendencia de Compañías y
  Consejo Nacional de Valores )

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TRUST COMPANIES MARKETBUSINESS DEVELOPMENT
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Mutual Funds History and Development

• Mutual Funds exist since 1994 and although the
  Trusts started on 1995, the industry developed
  itself significantly after the passing of the new
  law in 1998.
• At present there are more than twelve companies
  actively involved in mutual funds and trust
  administrations.

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Mutual Funds

• Our market approach is a short term one and
  investments are in fixed-interest titles.
• Our investor profile is a middle income natural
  person.
• Comparing year 2.000 with previuos ones, the
  activity has decreased due to the diminishing of
  the profitability of the Funds industry.

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Trusts

• Since 1998 the trust market has remarkably
  developed.
• Many innovative forms have been introduced to
  manage tolls and allowances coming from road
  concessions and projects to administer cash-flow
  and portfolios and to reestructure liabilities
  from productive sectors.
• Trust market is mostly corporation oriented.

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Trust Business
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Uses and Types

• Investment Vehicle
• Guarantees
• Real Estate Financing and Investment Control
• Concessions
• Management of Resources and Inventory
• Management of Production related Assets and Real
  Estate
• Management of cash-flow and portfolios
• Assets, Brands and Companies Valuation
• Debt Restructuring

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Investment Trust
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Advantages and Uses

• Risk Analysis and Professional Administration of
  Fix Income Assets ( equity isolation )
• Investments in equities, with legal and
  administrative representation service.
• Financial and commercial control of the
  performance of the issuer.

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GUARANTY TRUSTS
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Advantages and Purposes

• A more efficient alternative -in cost and time-
  than the traditional collaterals.
• Guaranty trust doesnt involve legal proceedings.
• Grants structuring including cash-flow, credit
  portfolios or collectable accounts and tolls.
• Creditors are incorporated and can be easily
  rotated.

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Real Estate Trust and Funds
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Advantages and Purposes

• Cash-flow administration of funds involved in the
  projects.
• Investors are incorporated as beneficiaries of
  projects.
• Structuring real estate funds to develope
  infrastructure. These securities can be
  negotiable privately and in the stock market.

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Administration Trust
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Advantages and Purposes

• Cash-flows and management supervision and
  control (for creditors purposes ).
• Control and administration of repayment sources
  resulting from credit portfolios and collectable
  accounts.
• Through a mixed figure from guaranty and income
  outcome control, the administration trust will
  control and develope infrastructure projects.
• Equity isolation of assets that have been
  transferred to the trust.
• Cession or discount of fiduciary rights from
  trusts whose assets are cash-flow and incomes.

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Securitization
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Purposes

• To finance infrastructure projects.
• Alternative mechanism for capital and/or
  privatizations openness.
• Capitalization and/or purchasing funds of public
  and private companies.
• Stock issues to the account of assets and
  productive units which are part of an isolated
  equity.