Bermuda's tax exempt status is attracting high-technology companies like Teledesic to the Island, business executives in San Diego heard.

The comment was made last week by Bermuda Stock Exchange CEO William Woods.

"If Bill Gates and Paul Allen set up Microsoft today, they'd incorporate it in Bermuda,'' he said.

He added, "I can say that with some authority because Bill Gates has recently incorporated Teledesic in Bermuda, his latest venture with (Craig) McCaw.'' "Teledesic is setting up a whole network over the next few years of low orbiting satellites, which will provide voice, data, Internet access to portable devices anywhere in the world, whether you are on the top of Mount Everest or sitting in the Antarctic.

"He has incorporated it in Bermuda for commercial reasons. If your company has revenue streams and an investor base from all over the world, it makes absolutely no sense to have that revenue stream funnelling into a domestic corporation in the US (or Europe) and suffering corporation tax on your whole wide world income here in the US before you dividend that revenue out to international investors around the world.

"Bermuda acts as a tax neutral funnel to bring all of your global income into a Bermuda corporation, before funnelling out higher dividends. So Bill would be a richer man if he had incorporated Microsoft in Bermuda.'' San Diego business people were impressed with that view, but were even more impressed with the emerging Bermuda Stock Exchange (BSX) and the opportunities it presents for future business growth and development.

They learned last week that the BSX was different from other exchanges because it is truly offshore, outside of the regulatory regimes of the US or Europe, and fully electronic.

Mr. Woods, at a speaking engagement organised by the Bermuda International Business Association (BIBA), pointed out the independence and the advantages of such an exchange.

He said, "As a self-governing territory, we set our own regulations and we set our own path. And that's very exciting, particularly for institutional products and institutional investors.'' Bermuda is the ideal place for the world's premier offshore securities market, because of its proximity -- one hour ahead -- of the world's most liquid capital market, New York.

Mr. Woods noted, "Because we open at 9.00 in the morning, we're opening one and a half hours ahead of the New York Stock Exchange, which creates a very exciting opportunity, particularly for the East Coast investors to trade US securities ahead of the opening of the main market in the US. "We also have a very complementary time zone with Asia, exactly 12 hours behind. Over time what we will see is the development of the trading of Asian securities in the North American time zone, creating a 24-hour rolling trading environment.'' The BSX was established in 1971 and was re-focused in 1992 as a for-profit company, and incorporated to develop the Exchange and financial services industry in Bermuda. Three years ago the company moved to fully electronic trading and the US Securities and Exchange Commission (SEC) has recognised the BSX as a Designated Offshore Securities Market.

Mr. Woods is the real architect behind the BSX development, an Exchange that is driven by meeting international standards. He has ensured that the BSX has membership in the Federation of International Stock Exchanges and the International Association of Securities Commissions, implementing their directives and standards. The BSX capitalisation exceeded $47 billion at the end of the year and is in excess of $50 billion, today. Both domestic and international securities are traded, with volumes growing significantly, exceeding $11 billion in value last year, most of which was comprised of US securities traded in Bermuda ahead of the opening of the New York market. The BSX also provides a listing platform for international securities, providing them with a marketing boost, as international institutional investors prefer, and many are required, to invest in listed securities on a recognised exchange.

The BSX lists mutual funds, international capital market instruments like depository receipts and provides a secondary listing for companies that choose Bermuda as their domicile, but are publicly listed elsewhere, such as ACE Ltd.

and EXEL Ltd.

There are more than 200 listed securities on the BSX, including more than 110 mutual funds, with the number growing quickly. Today's technology allows for fully electronic systems, and trading on the Bloomberg system from any where in the world. The BSX is also on the Internet.

The BSX has a brand new trading system, which in fact, was originally developed for Alberta in Canada and subsequently was sold to over 19 exchanges around the world. The Bermuda exchange is the latest implementation of it, where it has been dubbed the Bermuda Electronic Securities Trading (BEST) system. Said Mr. Woods, "What's exciting about that is the system has service physically located in secure facilities in Bermuda. As this electronic commerce develops, you'll find the execution of trades is actually happening physically in Bermuda on this secure service. So execution is happening offshore.

"Behind that we have a settlement that we are developing, called GlobalScript. And the system will initially take in domestic companies and then those companies that have chosen Bermuda as their international domicile.

It creates a name on register system, not a depository system for international companies.

"Investors will be on the register and owners of the securities, but in a fully electronic book-entry environment. That's exciting because we will be able to therefore create legal ownership rights offshore.

"For international investors in the future, both the trading and the settlement and ownership of their securities will be totally offshore in Bermuda, in a secure environment.'' BSX initiatives that are driving exchange business include a partnership with the insurance market in Bermuda, especially in helping Bermuda insurers toward their goal of securitization of risk -- the bringing together of the traditional capital and insurance markets. The BSX has designed and will launch next month the new FTSE/BSX Bermuda Insurance Index, in conjunction with FTSE, the world's leading index company. The index comprises 11 publicly traded companies domiciled in Bermuda, companies that have out performed their onshore competitors. The index is to be made tradable in the second half of the year, in the form of an index tracking fund and also in an options contract. The BSX is also providing a platform to list and trade the new securitized products, such as the catastrophe risk bond.

Cat bonds have been privately placed instruments in the past, but are expected to be listed and publicly traded in the future. The BSX is positioning itself to be the world's leading exchange for that type of insurance product. The BSX is also developing, with the Catastrophe Risk Exchange (CATEX), an offshore piece of that fully electronic risk trading environment, called CATEX International, allowing people to be based offshore in Bermuda, with the opportunity to access that fully electronic platform. "Even over the last three years,'' said Mr.Woods, "when the Standard & Poor's index has gone up more than 60-70 percent, the index of Bermuda insurance has outperformed the S&P by more than 45 percent.

"The reasons are that these companies deal with Bermuda's light but effective regulatory regime, which allows them to write all sorts of business in an offshore environment. Secondly, they experience the tremendous boost of Bermuda's tax regime. Effectively, they have no corporation profits tax.

"You can imagine how over time, that compounds when you have highly profitable companies where your profits and reserves are not suffering corporation tax. We think that when this index is published daily and people see this out-performance that more people will take up to the opportunities offered in Bermuda.'' The BSX also developed a mezzanine market to allow companies to become public and tradable, before going through the distracting exercise of an IPO. The main stipulation is a minimum trade of $100,000, to weed out the retail investors.

The BSX is also establishing a new website. The Offshore Funds Network, a definitive resource for professionals in the offshore funds sector, including tracking performance figures.

BSX CEO WILLIAM WOODS `Bill Gates would be a richer man if he had incorporated Microsoft in Bermuda.' -- William Woods