What will LuxCSD offer its customers? Access T2S via LuxCSD

LuxCSD Gateway to T2S and the international markets for all types of securities Target 2 Securities ICSD Clearstream Banking Luxembourg Banks Other market participants Fund agents Luxembourg Stock Exchange 1 1

LuxCSD Gateway to T2S and the international markets for all types of securities T2S is live for the first CSDs – it is a reality EUR denominated issuance into T2S brings significant advantages: - Liquidity management advantages for issuers and investors - Counterparty reach to all Eurozone CSDs and both ICSDs LuxCSD combines the best of ICSD and CSD issuance approaches: - an evolution of international market standards for issuers - risk free central bank money issuance and corporate action cash flow - Distribution into the combined T2S and ICSDs worlds

Access T2S via LuxCSD LuxCSD will serve as a T2S access point for investment fund settlement in CeBM in the same way as it does for other asset classes. It will deliver routing services for fund orders and functions as a centralised facility for the issuance, settlement and custody of investment funds. LuxCSD will also offer full access to all T2S markets and services: - Issuer CSD capability into T2S - All T2S markets will gradually be available to LuxCSD customers - All T2S services will be available to LuxCSD customers (e.g. DCP)

Client: XXXXXX Title: XXXXXXX Current CSD Participation Status 24 CSDs signed the Framework Agreement Clearstream’s CSD in Germany and LuxCSD will count for up to 40% of the expected T2S settlement volume Currently two CSDs will serve the Luxembourgish market

Client: XXXXXX Title: XXXXXXX T2S enables new options for market access: Consolidation and direct access Historic post-trade model Emerging post-trade model Bank / global custodian Bank / global custodian CSD(s) Agent Agent Agent Agent Agent Agent Agent Agent Agent Agent Agent Agent T2S CSD CSD CSD CSD CSD CSD CSD CSD CSD CSD CSD CSD CSD CSD CSD CSD CSD CSD CSD CSD CSD NCB acc NCB acc NCB acc NCB acc NCB acc NCB acc NCB acc NCB acc NCB acc NCB acc NCB acc NCB acc NCB account Exposure to variety of banking counterparties Cash account and collateral fragmentation Limited settlement netting potential Complex network of operations Exposure to CSD & central bank infrastructure Consolidation of cash and collateral Improved settlement netting Single point(s) of access This is the description of the general T2S model, to show the T2S benefits. It does not entirely fit the LuxCSD approach.

T2S will trigger changes for market participants Level of change Extensive, for CSDs Relevant, for direct customers of CSDs Limited, for indirect customers of CSDs Opportunities resulting from T2S Reengineer cash and securities network with option to - access infrastructure for cash and securities directly - pool and centralize cash and securities

T2S features adaptation – Wave 4 LuxCSD – as Issuer CSD Partial Settlement  Matching Rules  Bilateral cancellation   Instruction Linking LuxCSD  Instruction Types (in 15022 format) Instruction Prioritisation  Hold and Release of Instructions  Auto-Collateralisation1  Ex-/cum-flag and opt-out indicator  T2S recommendations for Market claims and Transformations2  1 Progressive Implementation

New Migration Composition and Timeline LuxCSD new migration date: 6 February 2017 LuxCSD adapts the new migration timeline which foresees a migration on 6 February 2017 T2S Settlement Volume* 15,5% 1,1% 22,1% 37,9% 23,4% Balanced composition of new wave 4 reduces migration risks Strong dependency remains to a successful migration of Euroclear ESES markets in September 2016 * Source figures (2014): http://sdw.ecb.europa.eu

Application to Application (A2A) LuxCSD Connectivity A set of A2A and U2A connectivity channels will be provided   LuxCSD Connectivity Application to Application (A2A) Portal (U2A) ISO 150222 CreationOnline Xact web portal1 Settlement and reconciliation  Cash Asset Servicing Global securities financing (GSF) Investment fund services (IFS) On the A2A side, there is a high level of continuity in terms of connectivity channels. On the portal side, LuxCSD will roll out in phases a new, state of the art portal – the Xact web portal. The Xact web portal will be available to LuxCSD customer for T2S settlement as from September 2016; CreationOnline will need to be used as a parallel system for asset services for a certain period of time (until November 2016). U2A – User to Application A2A – Application to Application 1 Detailed roll-out per service element to be announced

LuxCSD adopts new features of Clearstream Xact A progressive consolidation of the portal and SWIFT/File Transfer messaging across CSDs and ICSD Today ... T2S Go Live … Post T2S ClearstreamXact: a unique platform to access Clearstream's ICSD and CSD services Harmonised Instruction and report formats to cover all business services of CSD and ICSD (common subscription and format) Clearstream’s ICSD and LuxCSD Connectivity SWIFT CreationOnline File transfer (internet and VPN) Clearstream Xact - Xact via SWIFT - Xact via File Transfer Clearstream’s German CSD Connectivity SWIFT CASCADE Host/PC File transfer and real-time - Xact Web Portal For T2S settlement activity, clients are required to use Xact, however, our existing channels remain accessible for non T2S activity New Connectivity, simple, efficient, secure

Xact Web Portal: access to all services Single sign-on to access the full range of services Dashboard Settlement Asset Servicing Tax Cash Reporting & Monitoring Reference Data User Management Help & Resources Xact Web Portal Customer Access in one single place to all services for your activity with both the CSDs and ICSDs

ClearstreamXact also via Swift and File Transfer LuxCSD will ensure the translation of customers formats to T2S Today ... T2S Go Live … Post T2S ISO 20022 ISO 15022 Customer Directly connected Customer ISO 15022 ISO 20022 Indirectly connected Customer ISO 15022 ISO 15022 Customers acting in ICP mode will provide their messages in ISO 15022. Customers acting in DCP mode will provide core settlement instructions in ISO 20022 to T2S. LuxCSD will translate ISO 15022 from customers to ISO 20022 for T2S. LuxCSD will also translate ISO 20022 from T2S to ISO 15022 for customers. ISO 20022

Client: LuxCSD clients Title: TESTING PREPARATION WAVE 3 yes LuxCSD T2S readiness The LuxCSD T2S readiness is delivered by Clearstream. It ensures a smooth transition to T2S for its customers, based on a Staged Implementation delivering Continuity of services and quality service level throughout adaptations to T2S Key service elements deployed starting as of Wave 4, to allow customers to fully leverage the benefits of T2S 2016 2017 2018 Q1 Wave 2 Q2 Q3 Wave 3 Q4 Q1 Wave 4 Q2 Q3 Q4 Issuer CSD Luxembourg (LuxCSD) Settlement adaptations to T2S Investor CSD1 Investor CSD Product & Services roll-out 22 September 2018 1 Service elements roll-out plan to be announced in Q2

LuxCSD – Client Readiness1 Client: LuxCSD clients Title: TESTING PREPARATION WAVE 3 yes LuxCSD – Client Readiness1 2016 2017 Q1 Wave 2 Q2 Q3 Wave 3 Q4 Q1 Wave 4 Q2 Q3 Q4 Set-up, Testing, and Migration Windows Client Consultation LuxCSD T2S information meeting for all LuxCSD clients BIC11 and DCA set-up Account opening2 U2A – inbound (T2S community environment) A2A – outbound (T2S community environment) Training (Xact test environment) Migration (Pre/Post-Implementation) Consultation Middle of March Ref Data set-up Account Set-up U2A A2A Training Migration T2S Test Phases Community Test Wave 3 Wave 4 Multilateral Test Wave 4 Migration Test Wave 4 Multilateral Test W3 Migration Test W4 Community Test W4 Migration Test 06/02 – Go Live W4 17+18/12 - MWDR 09+10/07 - MWDR 01+02/10 – MWDR (optional) U2A – User to Application – Xact Portal (1CSR for settlement, 1CAS for asset servicing) A2A – Application to Application (Swift, CDI) Wave 4 Business Day Test MWDR – Migration Weekend Dress Rehearsal 14 1 Client Readiness documentation will be gradually released to Clients starting Q1 2016

LuxCSD for investment funds

Current European investment fund landscape Domestic European fund domiciles (Germany, France, …) co-exist with two important cross-border fund domiciles (Luxembourg and Ireland) The largest domestic markets are CSD markets which show very limited cross-border distribution volumes Investment funds domiciled in Luxembourg and Ireland are distributed in Europe, but also around the globe wherever investor demand exists Luxembourg is a register funds market, but has the challenge of several parallel delivery locations for fund shares Register One or more CSDs One or more ICSDs

Client: XXXXXX Title: XXXXXXX Overall principle in Luxembourg The delivery of fund shares follows investor demand Domestic Investor - Distributor International Investor - Distributor T2S principle Perspective Transfer Agent Lux Funds

Client: XXXXXX Title: XXXXXXX The investor view Is there demand from investors? T2S principle Perspective

Challenges for fund promoters and transfer agents Transfer Agents (TAs) might face an increasing demand from distributors to facilitate settlement through a CSD TAs will need to accommodate this while protecting the transparency of their distribution for commercial policy and trailer fee processing TAs having access to central bank money will potentially want to move settlement there TAs not having central bank money access might need an agent in one of the CSD markets

Current service offering of CSDs Most countries and their respective CSDs offer services for investment funds for local domiciled funds In most countries the full issuance of the investment funds are in the CSD (some countries have „mixed models“) Most CSDs offer clearing, DvP settlement and/or cash netting services for investment funds in the same way as for equities, ETFs, certificates, etc.

Client: XXXXXX Title: XXXXXXX The TA view Domestic Investor - Distributor International Investor - Distributor International Investor - Distributor Is there a demand from TAs to actively address a consolidation of their various CSD links, i.e.? centralise the issuance process strategically? actively address the transparency aspects? T2S principle Perspective Transfer Agent Lux Funds

How will this evolve in the future? Client: XXXXXX Title: XXXXXXX How will this evolve in the future? Investor demand? ? The TA´s strategic intentions? T2S principle Perspective

Delivery of fund shares into T2S A streamlined, single point of access Access to the T2S environment Harmonised infrastructure Central bank money where needed Commercial bank money where necessary i.e. co-existence with delivery of fund shares in the register for e.g. Asian investors Dedicated services for funds e.g. transparency reports