Dubai Financial Market Presentation to AMEDA: Role of DFM CSD in Managing Corporate Actions DFM’s Settlement Model April 2012

1 Role of DFM CSD in Managing Corporate Actions www.dfm.ae 1 Role of DFM CSD in Managing Corporate Actions DFM operates a central securities depository for equities & listed bonds in dematerialized form DFM is mandated by law to manage the share book of all public companies listed on the DFM exchange; DFM is not the issuer or share registrar – issuers/share registrars may request for electronic link with DFM CSD to access their respective share books DFM is also an outsource service provider [OSP] to issuers/share registrars for management of cash-type of Corporate Action [CA] DFM manages 2 types of CAs: Cash and Shares Optional for issuers/registrars to appoint DFM as Outsource Service Provider [OSP] to manage cash type of CA Non – OSP role DFM as an OSP Generate share book, Generate share book, manages cash payments as follows: Bank transfers to investor bank accounts; and/or Cheque payment [if requested for by investor]; and/or Direct credit to DFM i-Vestor card product Note 1 Note 1 The i-Vestor card is a DFM product in collaboration with a commercial bank to issue debit /ATM cards to all retail investors. Dividends are credited directly into the debit card thereby minimizing issues of lost/unclaimed cheques. Investors withdraw dividends via ATMs CASH SHARES Role of DFM CSD: Generate share book Crediting CA shares directly into investor depository accounts

2 DFM’s Settlement Model www.dfm.ae DFM’s Settlement Model DFM’s settlement model is linked to its depository account structure How DFM settles trades with Clearing Members depends on whether Clearing member-clients are direct investors or custodian investors [ie. investors using a custodian to custodize securities & settle trades] The following is how DFM maintains its depository account structure: Investor X CSD Account DFM settles with Custodian Clearing Member Agreement Broker indemnity to settle rejected custodian trades Lodge collateral with DFM Custodian for Investor X NIN Agent Account Trading/ Clearing Member Investor X Trading Account Option 2 DFM CSD Investor NIN (Investor X) Option 1 Investor X CSD Account DFM settles with Broker Trading Clearing Member Agreement Lodge collateral with DFM Investor X NIN Trading/ Clearing Member Investor X Trading Account

3 DFM’s Settlement Model Key Features of DFM’s Settlement Model www.dfm.ae 3 DFM’s Settlement Model DFM CLEARING & SETT. MODEL FOR CUSTODIAN INVESTORS Key Features of DFM’s Settlement Model Seller Selling Custodian Sell TM/CM DFM Buy TM/CM Buy Custodian Buyer T T+1 T+2 BIS DVP Model 2 – gross securities settlement, net financial settlement T+2 settlement cycle All brokers & custodians are Clearing Members DFM completes financial settlement by 10.00AM UAE time & commences securities settlement from 10.15AM UAE time to ensure that DVP between DFM and DFM Clearing Members [CM]. Securities are delivered only if full payment is made DFM does not require a guarantee fund now because it does not face market risk; exposures are mitigated as follows: Buy trades - full purchase values of buy trades collaterized 100% by Clearing Member via a real-time on-line collateral adequacy checking process before a buy order can becomes a valid order & DVP settlement Sell trades - sell orders are pre-validated real- time on-line against securities availability before a sell order becomes a valid order Trades are settled on T+2 but in order to accommodate settlement by institutional investors using services of Custodians, DFM implemented a Settlement Rejection Process for Custodian investors. This means that the broker clearing member will settle the rejected trade first until the Custodian receives matched settlement instructions from its clients to settle 3.00PM 19.00PM 9.00AM 10.00AM 10.15AM Sell instruction Non-Custodian investors Settlement instruction Y/N N Cust. Agent account Reject settlement? Receive payment from DFM Deliver securities Y Sell Order (Sett Cap validation) CM has securities? Receive payment from DFM Deliver securities Y N Order Matching & Execution/ Novation for settlement 1. Adjust cash obligations 2. Late confirmation Sett Bank Receive payts/make payts. Settle securities Dr. Seller’s account for securities Cr. Buyer’s account Trade file to all participants Final Cash Net Obligation. Send settlent instn to sett banks Default Action -restrict securities delivered N Buy Trades (Sett cap validation) Pay DFM? Receive securities Y Y Cust. Agent account Reject settlement? N Pay DFM Receive securities Non-Custodian investors Y/N Buy instruction Settlement instruction

Settlement Rejection of Buy Trades by Custodian 4 www.dfm.ae con’t. DFM’s Settlement Model Local broker CM accepts late confirmation Yes No Local broker CM holds unpaid purchased securities Local Custodian receive Settlement Instruction by T+1? Local Custodian pays DFM by 10 am T+2 DFM credits the securities to the client’s account by 10.15 am T+2 Local Custodian accepts purchase trade settlement obligation; DFM settles purchase trade as follows: Local Custodian rejects the trade by 7.00 pm on T+1 T+2 9.00am : DFM rejects trade to Local Broker CM Client Buy Rejection House Account T+2 10.00am : Local Broker CM pays for rejected trade T+2 10.15am : DFM credits securities to Local Broker CM Client Buy Rejection Account Late Confirmation by Client A. Late confirmation by Client [between T+2 to 1.00pm T+4] Client sends matched settlement instruction to Local Custodian Local Custodian pays Local Broker CM Local Broker CM request DFM to transfer purchased securities to Client Agent Account with Local Custodian [provided Local Broker CM has agreed to a late confirmation period for client] No transfers after T+4   Settlement Rejection of Buy Trades by Custodian CM = Clearing Member

Settlement Rejection of Sell Trades by Custodian 5 www.dfm.ae con’t. DFM’s Settlement Model Settlement Rejection of Sell Trades by Custodian Local Custodian receive Settlement Instruction by T+1? Local Custodian receives payment from DFM by 10 am T+2 DFM debits securities from the client’s Agent Account by 10.15 am T+2 Local Custodian accepts sell trade settlement obligation; DFM settles sell trade DVP as follows: Local Custodian rejects the trade by 7.00 pm on T+1 On T+2 DFM rejects trade to Local Broker Sell Rejection House Account If Local Broker has securities, sell trade rejection settled. If Local Broker has insufficient securities: Selling client securities in Agent Account kept under Pending status – client cannot sell and not entitled to corporate actions Sale proceeds to Local Broker CM retained by DFM until final resolution of the rejected trade Buyer is settled Yes No Options available for Local Broker CM to settle rejection: A. Late confirmation by Client [between T+2 to 1.00pm T+4) Client sends matched settlement instruction to Local Custodian Local Custodian request DFM to reverse rejection [provided Local Broker has agreed to a late confirmation period for client] DFM removes Pending status in Client Agent Account on day of rejection reversal & pays sale proceeds to Local Custodian. B. Local Broker CM purchases securities from market on T+2 C. Buy-in Mechanism Broker risk eliminated for settlement Client asset released only after receipt of cash   D. If buyin fails, mandatory Sellout by Seller [to be replaced by buyer cash compensation soon] CM = Clearing Member