AECSD John Woodhouse Group COO & Director Capital Markets, Thomas Murray Risk Issues for CSDs in 2010 – Examination of Role in Information Dissemination

© 2010 Thomas Murray Ltd. Page 2 PRIVATE AND CONFIDENTIAL Risk Issues for CSDs  Risk Issues – how Eurasia fares  Counterparty Risk – continues to maintain focus  Asset Servicing Risk Rating Profile for Eurasia  Developments in the Provision of C.A. Information - Last Two Years  Information Disclosure – TM Transparency Criteria Contents

© 2010 Thomas Murray Ltd. Page 3 PRIVATE AND CONFIDENTIAL Risk Issues – Key issues across the globe Risk Issues for CSDs Key Developments:  Global: Short selling has been banned in many countries since The ban has been removed in some markets but still remains in Austria, Belgium, Denmark, France, Iceland Ireland, Luxembourg, Portugal, Japan, Korea. Tighter reporting requirements for short positions are also in place in most markets.  France: The settlement cycle is expected to be shortened from T+3 to T+1.This modification aims to reduce the risks associated with short selling, and will include all instruments including the French Debt.  Qatar: The cash settlement of the electronic transactions is now carried out by the central bank which replaced the risk exposure in one single clearing bank by the use of central bank funds.  Korea: The Banking Act has been revised and from November 2010, the restrictions on banks providing loans to foreign investors for securities investment purposes will be abolished.  Czech Republic: In July 2010, CDCP (formerly UNIVYC) became a fully operational CSD, harmonising the Czech market practices with the EU markets; and the transfer of records from the Central Securities Registry (SCP) database to CDCP was completed.  Canada: Although 90% of the securities are immobilised or dematerialised, initiatives are underway to introduce a “book entry only” service by 2014 to eliminate physical securities.

© 2010 Thomas Murray Ltd. Page 4 PRIVATE AND CONFIDENTIAL Risk Issues – Key Issues in Eurasia Risk Issues for CSDs Key Developments:  Russia: FFMS is planning to tighten the regulation of registrars. The stricter requirements on registrars’ activities will apply additional procedures and measures to registrars and is expected to prolong the time for the registration process. FFMS is also planning to introduce a CSD concept in Russia (on the basis of Crest in the UK). The functions between the CSD and the registrars will be split for listed and unlisted securities. The CSD will execute the functions for listed securities, which the FFMS has called the 'tradable part', while the registrars will undertake the function for unlisted securities or 'non- tradable part'.  Kazakhstan: In November 2009, the KASE merged with the Regional Financial Center of Almaty (STF RFCA) which resulted in some changes such as the implementation of repo transactions and the reduction of the settlement cycle for STF RFCA trades from T+3 to T+0.  Bosnia and Herzegovina: In March 2010, CRS extended the cash settlement deadlines. The market deadline for posting funds into the liquidity reserve was extended from 12.00pm on T+1 to 12.00pm on T+2, and the remaining net funds are required to reach the account of CRS by 9.00am on T+3 instead of the previous 1.00pm on T+2.  Belarus: The CSD in Poland (KDPW) signed a Memorandum of Understanding (MoU) with the Republican Central Securities Depository of Belarus (RCSD), in order to set up an operational link between the two entities and list Belarusian companies at the Warsaw Stock Exchange (WSE).  Ukraine: In October 2009, the private joint stock company AUSD became the legal successor of the IRSU and is now providing depository, clearing and settlement services in compliance with Ukrainian legislation.

© 2010 Thomas Murray Ltd. Page 5 PRIVATE AND CONFIDENTIAL Counterparty Risk Issues – Key Issues across the globe Counterparty Risk Issues Key Developments:  Poland: The CSD is to create a new subsidiary which will assume the role of CCP in  Spain: The market regulator issued a clearing, settlement and registry system reform which includes the future introduction of a CCP in the market. Furthermore, LCH.Clearnet started operating as a CCP for government debt and repos in August 2010 with settlement taking place at Euroclear Bank or Clearstream.  Denmark, Finland, Sweden: CCP services were launched in the NASDAQ OMX Nordic markets in October The appointed CCP is EMCF but competitive clearing is expected in the future with two more CCPs (EuroCCP and SIX x-clear). An interoperability programme between the three CCPs is underway.  Greece: The post trading services framework is to be unbundled in September 2010, with the introduction of a clearing membership structure to consolidate the risk exposure at the clearing member level rather than at the level of individual brokers.  Kenya: Settlement caps based on the activities of market participants were introduced in January Participant contributions to the guarantee funds are expected to significantly increase next year.  Japan: Issuance of a roadmap to reduce settlement risks for government bonds trades. Reduction of settlement cycle and expansion of the use of the CCP (JGBCC)

© 2010 Thomas Murray Ltd. Page 6 PRIVATE AND CONFIDENTIAL Counterparty Risk Issues – Key Issues in Eurasia Counterparty Risk Issues Key Developments:  Russia : Following changes of the clearing rules at DCC, participants can now settle DVP transactions on a real-time basis throughout the day until 7.00pm. In February 2010, MICEX introduced new modes of trading in the stock market, where MICEX acts as the CCP for all transactions conducted under the new modes including the main trading mode, the REPO trading mode and the negotiated transactions mode. The transactions of the new modes will be conducted with the most liquid shares from the composition of the MICEX Index and bonds with a high credibility rating. MICEX also introduced a CCP for its derivatives markets in June 2010.

© 2010 Thomas Murray Ltd. Page 7 PRIVATE AND CONFIDENTIAL Rating AAA AA+ AA AA- A+ A A- BBB BB B CCC CC C AAA AA+ AA AA- A+ A A- BBB BB B CCC CC C Absolute Rating - Highest Rating Public CSD TM Rating of 10 Eurasian CSDs Average Rating - Highest Rated Regions Rating Counterparty Rating Market Comparisons Average Rating - Eurasia Gap between top and bottom rated Eurasian CSDs Counterparty Risk Issues

© 2010 Thomas Murray Ltd. Page 8 PRIVATE AND CONFIDENTIAL Counterparty Risk Issues

© 2010 Thomas Murray Ltd. Page 9 PRIVATE AND CONFIDENTIAL CSD Role in Corporate Actions  Corporate Actions:  Event initiated by a public company’s board of directors that gives an entitlement to holders of the company’s securities. Information on the event is key to a successful corporate action  Asset Servicing:  Service provided by custodians or CSDs related to securities administration activities such as processing corporate actions, proxy voting and tax reclaims.  Weighting varies dependent on extent of services provided by the CSD:  33% where CSD covers full service range  23% where CSD provides a reduced range of services or is not recognised as the primary source of information

© 2010 Thomas Murray Ltd. Page 10 PRIVATE AND CONFIDENTIAL CSD Role in Corporate Actions Asset Servicing Risk Factors:  Receipt of Information  Information received from issuer, registrar, exchange  Manual vs automated, ‘guaranteed’ vs best endeavours  Dissemination of Information  Information disseminated to participants  Mode of dissemination, timeliness, liability  Receipt of Instructions  Instruction received from participant  Manual vs electronic, follow-up, time constraints, corrections permitted  Execution of Instructions  Processing of instruction  Type of processing, provide confirmation/report, timeliness, liability  Proxy Voting

© 2010 Thomas Murray Ltd. Page 11 PRIVATE AND CONFIDENTIAL CSD Role in Corporate Actions AAA AA+ AA AA- A+ A A- BBB BB B CCC August 2010

© 2010 Thomas Murray Ltd. Page 12 PRIVATE AND CONFIDENTIAL Rating AAA AA+ AA AA- A+ A A- BBB BB B CCC CC C AAA AA+ AA AA- A+ A A- BBB BB B CCC CC C Absolute Rating - Highest Rating Public CSD TM Rating of 7 Eurasian CSDs Average Rating - Highest Rated Regions Rating Asset Servicing Rating Market Comparisons Average Rating - Eurasia Gap between top and bottom rated Eurasian CSDs CSD Role in Corporate Actions

© 2010 Thomas Murray Ltd. Page 13 PRIVATE AND CONFIDENTIAL Corporate Actions Developments in the Last Two Years CSD Role in Information Processing Information Processing:  USA: The CSD in collaboration with SWIFT, has launched its new model of corporate action messages on the basis of ISO corporate action message formats. The new model of messages establishes a framework of the eXtensible Business Reporting Language (XBRL), which allows issuers to directly distribute the corporate action announcements in the financial markets on an electronic basis.  Brazil: In January 2010, the market regulator introduced new rules of information requirements to the issuer companies listed at the exchanges to be included in shareholder meeting announcements. This provides the shareholders with the facilities to access the relevant information and documents in relation to the shareholder meetings which enhances market transparency for participants.

© 2010 Thomas Murray Ltd. Page 14 PRIVATE AND CONFIDENTIAL Eurasia: Information Processing CSD Role in Information Processing Type of CAsInformation Processing InvolvementLevel of Liability Bosnia CRSDividends, Capital Increase/Decrease Obliged to announce CAs via its website and in English No legal responsibility for any errors it makes. Croatia SKDD d.d Dividends, Capital Increase/Decrease, Splits, Tender Offer, GMs CA information received from issuers by post, , fax or physical letter. Distribution of CA information via proprietary system and web Liable for late or incorrect distribution of CA information Kazakhstan CSD Dividends, Interest, Redemptions. Mergers, Consolidations and Splits more rarely. CA information received from registrars and manually input into CSD system. For international issues, the information is received via SWIFT from Clearstream. Liable for direct losses where it has failed to correctly process CA information Russia DCC Dividends, Interest, Redemptions, Bonus issues, Splits, Consolidations, Repurchase offers Ca information is received by paper or fax from issuers or by EDI or fax from registrars. CA information is then distributed to participants via EDI, SWIFTnet or , and posted on DCC's website Liable for incorrect information: direct losses and errors caused by third parties. Russia NDC Dividends, Interest, Redemptions, Bonus issues, Splits, Consolidations, Repurchase offers CA information is largely received in physical form or via EDI. Distribution to participants is via EDI or , and posted on NDC's website. Liable for incorrect information: direct losses and errors caused by third parties. Serbia CSD&CH Dividends, Interest, Redemptions, Take-over bids, Issuance of shareholders books Notification of CA information via internet. Liable for losses due to errors, omissions or fraud Ukraine AUSD Dividends, Interest, Splits, Mergers, GMs CA information published in websites authorised by the regulator Liable for operational errors

© 2010 Thomas Murray Ltd. Page 15 PRIVATE AND CONFIDENTIAL CSD Governance & Transparency CSD Role in Information Disclosure Governance & Transparency Risk: The risk of loss due to poor governance and management arrangements and inadequate disclosure of information. Directors and management have a responsibility to ensure the market has adequate and timely information on a fair and equivalent basis.

© 2010 Thomas Murray Ltd. Page 16 PRIVATE AND CONFIDENTIAL CSD Information Disclosure CSD Role in Information Disclosure TM Rating Information Criteria:  Corporate Information is readily available to market participants according to the IOSCO recommendations on the disclosure of information.  Statistical information is produced in a timely manner and is made available to participants and the wider market interests.  A forum is available for all market participants to receive information and provide their input to management.

© 2010 Thomas Murray Ltd. Page 17 PRIVATE AND CONFIDENTIAL TM Rating Information Criteria CSD Role in Information Disclosure Corporate Information:  Annual reports and annual accounts  Plan and budget for the coming year  CSD Code of Conduct  Risk management methodology and processes  Participant rules and regulations  Audit policy  Information on the external auditing of operational controls  Information on relevant capital market laws or CSD law  Statement on CSD’s liability for errors, omissions or late execution  Statement on controls CSD operates  Technical operational information  Compliance with IOSCO guidelines  Publication of AGC questionnaire

© 2010 Thomas Murray Ltd. Page 18 PRIVATE AND CONFIDENTIAL TM Rating Information Criteria CSD Role in Information Disclosure Statistical Information:  Data related to services it operates Assets under custody Settlement data Buy-in data Fails rates Concentration information Corporate action events  Participant criteria and surveillance information  Information on its operational performance Computer availability/unavailability Computer utilisation DRP test results Claims received/paid Staff responsiveness measures  Risk management measures

© 2010 Thomas Murray Ltd. Page 19 PRIVATE AND CONFIDENTIAL TM Rating Information Criteria CSD Role in Information Disclosure Forum to Receive Information:  User Group arrangements  Participant representation on internal committees/working groups  Account management/client relationship meetings  Feedback mechanisms