The Republic of Panama, with an area of approximately 76,900 sq km, is located between Costa Rica and Colombia, forms the narrowest and lowest portion of the isthmus that links North and South America.

Panama is famous for its Canal which joins the Atlantic and Pacific Oceans. With a population of about 2.8 million and due to the importance of the Canal, Panama has excellent telecommunications as well as international airline links.

There is a sophisticated banking and financial system together with a major Free Trade Zone. Now firmly established as a democracy, the Country has legal system based on a constitution and is politically stable with a continuously growing economy.

POPULATION

The population of Panama is approximately 2.4 million, about 52% of which are in urban areas.

POLITICAL STRUCTURE

The Isthmus of Panama was discovered in 1501 by Rodrigo de Bastidas and Vasco Nuñez de Balboa, who had a leading part in the establishment of Santa Maria La Antigua del Darien in 1510, the first permanent settlement on the mainland of the Americas. In 1513, Balboa led an expedition, in Panama, which discovered the Pacific Ocean.

Pedro Arias Davila founded Panama City on 15th August 1519. Panama was a Spanish colony until 1821 when it became part of the Gran Colombia of Simon Bolivar. In 1903, Panama broke its alliance with Colombia and became an independent republic.

The executive branch of the Government is at present composed of a President and two vice-presidents, elected for a five-year term by direct election.

INFRASTRUCTURE AND ECONOMY

Colon Free Zone

The Colon Free Zone is located on the Caribbean side of the Isthmus of Panama near the Atlantic entrance to the Panama Canal. This Free Trade Zone is the second largest in the world after Hong Kong.

Operations and transactions taking place in the Free Trade Zone (US$11 billion) are subject to a special tax treatment whereby imports from other parts of the world and re-exports to other countries are exempted from any import or export taxes imposed by Panama. Income earned from re-exports is taxed at specially reduced rates.

Panama Canal Areas

On December 31, 1999, the U. S. will turnover the Panama Canal to Panama's new Canal Authority. This date marks a new era for Panama and is the last day in which all U. S. Military bases must be reverted to Panamanian control.

The canal areas, where these bases are found, comprise 233,000 acres of prime real estate and over 7,000 commercial and residential buildings.

As a result of this land transfer, unique investment opportunities exist in the tourism, maritime, real estate, transport and industry sectors.

Ports

Nearly 14,000 ships transit the Panama Canal each year with more than 192 million tons of cargo and 700,000 passengers and crew onboard. Because of this traffic and modern port facilities, Panama is expected to become the region’s principal multi-modal logistics center in coming years.

Today, Panama has the largest maritime fleet in the world and its four (4) new container ports represent a total investment of over US$4.5 billion. The ports, combined with the trans-isthmian railroad, are projected to move one (1) million cargo containers in 1999 and two (2) million by 2002.

Major opportunities for development of new business include: additional ports, shipyards and maritime services such as the storage, distribution and transport of cargo; financial and administrative services, insurance coverage, ship supplies and maintenance, as well as tourism enterprises.

Financial industries

Panama has the most modern and successful international banking center in Latin America, with more that 120 banks from 35 countries.

Panama's new banking law meets the standards of leading financial centers around the world for transparency and regulation. The Panama Stock Exchange is the fastest-growing in the region with a total volume of US$848,172,713 in 1998 – a 19.25% increase over 1997.

In addition, Panama is one of the most secure offshore centers in the world. In the financial industry, diverse investment opportunities exist in banking, investment capital financin, insurance and reinsurance.

LANGUAGE

Spanish is the official and spoken language. English is also spoken widely in urban areas and is used daily in commerce and international trade.

CURRENCY

United States Dollar.

EXCHANGE CONTROL

None.

TYPE OF LAW

Based on Spanish Civil Law with many Common Law influences, particularly regarding Company Law, which is based on the Delaware Model.

PRINCIPAL CORPORATE LEGISLATION

Corporation Law No. 32 of 1927, Decree No. 130 of 1948, Decree No. 147 of 1996, Law No. 32 of 1978, Decree Law No. 5 of 1997 and Executive Decree 296 of 1997.

COMPANY FORMATION

TYPE OF COMPANY FOR INTERNATIONAL HOLDING, TRADE AND INVESTMENT

In substance, identical to IBCs. Generally, corporations are incorporated under the Corporation Law 32 of the 1927. Limited Liability Companies and Limited Partnerships are used also.

PROCEDURE TO INCORPORATE

By presentation of the proposed corporation’s signed Articles of Incorporation before a Notary Public who creates a Public Deed for registration at the Public Registry.

RESTRICTIONS ON TRADING

Cannot undertake the business of banking, trusteeship and trust administration, insurance, assurance, reinsurance, fund management, investment funds, collective investment schemes or any other activity that would suggest an association with the banking, finance, fiduciary or insurance businesses.

LANGUAGE OF LEGISLATION AND CORPORATE DOCUMENTS

Spanish and certified English translations.

REGISTERED OFFICE REQUIRED

Yes, must be maintained in Panama at the address of the Registered Agent.

NAME APPROVAL REQUIRED

Yes. Should be done in advance or at incorporation.

TIME TO INCORPORATE

One day.

NAME RESTRICTIONS

A name that is similar to or identical to an existing company. Names of well known companies incorporated elsewhere or a name that implies government patronage. LANGUAGE OF NAME

Names may be expressed in any language using the Latin alphabet. A Spanish or English translation may be requested by the Registrar.

NAMES REQUIRING CONSENT OR A LICENCE

Bank, building society, savings, insurance, assurance, reinsurance, fund management, investment fund, trust or their foreign language equivalents.

SUFFIXES TO DENOTE LIMITED LIABILITY

All Panamanian corporations must end with the suffix Corporation, Incorporated, Sociedad Anonima or the abbreviations Corp, Inc or SA. They may not utilize the suffix Limited or Ltd.

DISCLOSURE OF BENEFICIAL OWNERSHIP TO AUTHORITIES No.

CHANGE OF JURISDICTION

Companies organized under a foreign law may opt to be governed by Panama law and continue their existence as a Panama corporation, and viceversa.

SHELF COMPANIES We have a number of existing companies (both aged and new) for sale. These companies are "clean", that is to say, they have never traded nor engaged in any transaction whatsoever.

SHARES, TAXATION AND OTHER MATTERSS

AUTHORIZED AND ISSUED SHARE CAPITAL

The standard authorized share capital is US$ 10,000 divided in to 100 common voting shares of US$ 100 each or 500 common voting shares of no par value. The capital may be expressed in any convertible currency. The minimum issued capital is either one share of no par value or one share of par value.

CLASSES OF SHARES PERMITTED Non-voting shares, common shares, preferred shares, bearer shares and registered shares.

BEARER SHARES PERMITTED

Yes.

TAXATION

A Panama Corporation does not pay any tax on its world-wide profits.

DOUBLE TAXATION AGREEMENTS

None.

LICENCE FEES

Annual Tax of US$ 150 is payable.

FINANCIAL STATEMENT REQUIREMENTS

No requirement if income is of non-Panamanian sources.

MANAGEMENT STRUCTURE

DIRECTORS

Both corporations and natural persons may act as directors and the minimum number of directors is three. They may be of any nationality and need not be residents of Panama. Panamanian companies are also required to appoint a minimum of three officers (president, secretary and treasurer) who may also be the directors.

COMPANY SECRETARY

A company secretary must be appointed, who may be a natural or corporate person. The company secretary may be of any nationality and need not be a resident of Panama.

SHAREHOLDERS The minimum number of shareholders is one.

CORPORATE HIGHLIGHTS