A blueprint for pan-European settlement

The Euroclear group

The Euroclear group

The Euroclear group is the worlds leading settlement provider for domestic and international securities transactions, covering bonds, equities, investment funds and money-market instruments. User-owned and user-governed, the group offers securities services settlement, asset servicing and asset optimisation to financial institutions and other users located in over 80 countries.

Euroclear SA/NV is the parent company of the International Central Securities Depository (ICSD) and Central Securities Depositories (CSDs). The Euroclear group provides both ICSD and CSD services through its various entities:

Euroclear Bank SA/NV is the ICSD Euroclear France SA is the CSD for the French market Euroclear Nederland is the CSD for the Dutch market CRESTCo Ltd is the CSD for the UK market and Irish equities

The CSDs of the Euroclear group provide services in their respective markets, settling primarily local securities transactions of the countries they cover. Euroclear Bank, the ICSD of the group, serves as the settlement infrastructure for the international bond and equities markets, and offers a single entry point to more than 30 securities markets around the world.

We believe in listening carefully to your views and interests, and remain determined to find ways in which we can provide improved services that will reduce your costs and risks, and enhance the efficiency of your operations.

Delivering a

domestic market for Europe

Harmonising settlement and asset servicing
We want to create a truly domestic market for Europe, to offer an efficient solution for the current group markets, which can be extended to other European markets over time. We aim to do this in a way that is consistent with the G30 and Giovannini recommendations, and ESCB/CESR regulatory standards. Meanwhile, we provide support to regulators and market bodies such as the ECSDA, and for any initiatives of the European Commission. LCH.Clearnet We have established strategic alliances with stock exchanges and clearing houses on a non-exclusive LSE virt-x Euronext This initiative ensures that each markets interests are fully acknowledged. In addition, the Cross-border MAC deals with issues relating to market harmonisation on a pan-European level.

User value
The financial marketplace is constantly evolving. The introduction of the euro, the expansion of the European Union, deregulation, the erosion of national boundaries and a broader choice of investment opportunities all create new needs. As a fragmented market results in more expensive cross-border trading and settlement, harmonisation of local market practices across borders is necessary. The market is demanding a settlement and asset-servicing infrastructure that supports pan-European and global investment strategies and that offers streamlined and cost-efficient service options.

Working with the market to offer choice

Market consultation
As a market infrastructure, we aim to maximise user value by developing solutions that help market participants reduce their own costs and risks, and increase their efficiency, in a harmonised environment. Market Advisory Committees (MACs) in France, Belgium, Ireland, the Netherlands and the UK have

basis. These partnerships facilitate efficient straight-through processing, reducing risks and costs through book-entry settlement.

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been set up to act as the primary source of feedback and interaction between the Euroclear group and its domestic markets.

They also further our commitment to offer clients a real choice of settlement location.

CRESTCo

Euroclear France

Euroclear Bank

Euroclear Nederland

CIK

The acronyms used stand for: G30 (Group of 30), ESCB/CESR (European System of Central Banks/Committee of European Securities Re gulators), ECSDA (European Central Securities Depositories Association)

Business Model
Objective
Our Business Model outlines a choice of settlement solutions for Europe to: lower cross-border settlement tariffs; and reduce the complexity and risks associated with cross-border settlement.

Options for different business requirements

The Business Model will offer a choice of two service packages designed to meet your specific business requirements.

Domestic service package: available directly through accounts with the group CSDs under the relevant local Belgian, Dutch, French, Irish or UK law, in central bank money. This service will be available for those securities for which the Euroclear group acts as CSD.

Full service package: comprises the full range of services currently offered by Euroclear Bank, under Belgian law, offered in commercial bank money and central bank money. This service will be available for all securities held within the group, as well as for eurobonds and other securities for which the Euroclear group is not acting as sole CSD.

Structured implementation
The implementation of the Business Model will proceed in phases:

Full integration

The delivery of the Single Settlement Engine (SSE) It offers simple and open access to the five Euroclear markets Belgium, France, Ireland, the Netherlands and Client Client Client the fundamental building block by the end of 2006 will centralise the settlement positioning processes of

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the UK, as well as the international reach of Euroclear Bank, which can be gradually expanded to other markets. Agent bank The delivery of a consolidated systems platform will provide:

the Euroclear group.

Euroclear Bank

The launch of the Euronext-zone settlement solution an important intermediary step by the end of 2007 will provide a harmonised settlement platform for the straight-through processing of trades from Euronexts

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access to securities through a single operational securities account; a common communications interface; a choice of payment mechanisms, in either central bank money or commercial bank money; and a choice of service levels and tariffs.

single order book. Full service

Domestic service Shared costs (single platform)

The objectives of the Business Model will be achieved by the completion of the Single Application Platform (SAP) and the Common Communications Interface (CCI) forming the single platform.

Transparency
and user governance
Transparency is crucial to guarantee support for the process of change and harmonisation initiated by the Euroclear group, all the more so as the group includes both national CSDs and an ICSD with different service offerings and competitive environments. We are actively engaged in consultation with clients in each of the markets where we act as CSD, and with our international clients, as part of our continuous policy to involve all stakeholders in our evolution and As a user-owned and user-governed company, we have made information concerning the groups developments and projects more widely available. Dialogue with the market is maintained mainly through numerous consultation papers, and feedback We are also focusing on continuous consultation with the market. documents. They outline our views and seek market input on the Euroclear Business Model and the harmonisation of market practices and summarise market responses. that of the market.

Market consultation

Moreover, the MACs that have been established in each domestic market where we act as CSD, as well as the Cross-border MAC covering all group domestic markets, have proved to be an essential and effective source of market feedback and input.

Corporate structure
A new corporate structure has been implemented (as from January 2005) in order to: The restructuring has resulted in the formation of Euroclear SA/NV which owns and operates the shared systems, such as the SSE, and provides shared services maximise client protection against systemic risk; improve transparency in inter-company service delivery and cost allocation; and increase the flexibility of the corporate structure for potential future alliances and mergers. to all Euroclear group entities. CRESTCo, Euroclear Bank, Euroclear France and Euroclear Nederland are subsidiaries of Euroclear SA/NV.

Euroclear plc

Euroclear Investments

Euroclear

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Euroclear Bank

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Euroclear France

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Euroclear Nederland

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CRESTCo Ltd

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Global
reach
The ICSD function Euroclear Bank offers a single access point to over 30 securities markets worldwide, and is the premier provider of settlement services for international securities. Euroclear Bank As the ICSD, Euroclear Bank settles mainly non-domestic, crossborder transactions, where the counterparties are typically located in different countries. Euroclear Nederland Euroclear France

Local
efficiency
The CSD function Euroclear CSDs serve as local settlement systems, where the securities transactions of the countries they cover are settled. They also provide asset servicing facilities, which vary from market to market, and depend on local practices and regulations. These highly secure, automated and very efficient settlement systems offer clients a variety of services combined with low-cost central bank money settlement.

An extensive range of core and value-added services settlement of over-the-counter (OTC) and stock exchange trades, asset servicing and asset optimisation are available to clients along with proactive client support. CRESTCo

Group service

Settlement Euroclear Bank DVP model 11 Stock exchange2/OTC Commercial and central bank money Multi-currency (over 30 settlement currencies) Bilateral financing instructions Order routing and processing for funds (FundSettle) ETCMS Euroclear France DVP model 11 Stock exchange3/OTC Central bank money Monetary Policy operations

Asset servicing Safekeeping (over 80 issuer countries) Proactive tax assistance (over 30 markets) Corporate actions Electronic proxy voting Market claims management Default management New issues services Income and redemptions

Asset optimisation Securities lending and borrowing Integrated Collateral Management > triparty repo > triparty securities lending > triparty derivatives support > triparty secured loans > triparty collateral services Money transfer Banking services

offering

Safekeeping Depository services Corporate actions Market claims management Shareholder identification services > Titre au Porteur Identifiable (TPI) > Nominatif New issues services Income and redemptions

Collateral management Money transfer for DVP settlement Refinancing

Euroclear Nederland

DVP model 11 Stock exchange4/OTC Central bank money Multi-currency

Safekeeping Securities administration Corporate actions Market claims management Giro-based securities traffic New issues services Income and redemptions

CRESTCo

DVP model 11 Stock exchange5/OTC Central bank money Multi-currency (GBP, USD and EUR) Central counterparty services

Legal title for UK securities within CREST Tax assistance and Stamp Duty Corporate actions Electronic proxy voting Market claims management Automatic transformations Issuer services New issues services Physical stock deposits and withdrawals Income and redemptions

Delivery by Value (DBV) Stock loans Repos Central counterparty services

1 2

3 4 5

Delivery versus payment with simultaneous and irrevocable transfer of cash and securities Austria, France, Greece, Luxembourg, Portugal, Spain, UK, virt-x, Euronext and London Stock Exchange (LSE) Euronext Euronext, DTS segment of LSE LSE, Irish Stock Exchange and virt-x

Connecting within

Europe
and beyond

Euroclear Bank
Headquarters: Brussels Established: 1968 Local offices: Hong Kong, London (until 30 March 2005), New York, So Paulo, Singapore, Tokyo Clients: About 1,500, including major banks, broker/dealers, custodians, central banks, and other securities professionals

Euroclear Bank is an ICSD, providing a Delivery versus Payment (DVP) settlement system (DVP1 model) for internationally traded securities.

debt securities; equities; investment funds; depository receipts; and warrants and similar securities.

The risks associated with the services provided are very prudently managed through the use of policies and procedures which have minimised credit, liquidity, market, legal and operational risks.

Securities accepted may be in either physical or dematerialised form and include a range of domestic, international and global securities: The provision of intra-day credit to manage the timing gaps that arise from cross-border settlement represents an essential component of DVP and enhances settlement efficiency for the cross-border securities markets.

Services are offered to major financial institutions in more than 80 countries.

Settlement

Asset servicing

Asset optimisation

Settlement services include:

Asset servicing covers all markets in the eurozone and key markets

Integrated Collateral Management These services support clients bilateral repurchase agreements, securities loans, secured loan facilities, deriva-

multi-currency settlement (in over 30 settlement currencies); settlement in both central bank money and commercial bank money with full access to intra-day liquidity; bilateral financing instructions; FundSettle: a dedicated fund processing platform; and Euroclear Trade Capture and Matching System (ETCMS).

around the world and includes:

Custody and safekeeping of securities via a network of Euroclear Depositaries. Securities are held through Depositaries, custodian banks or directly in local settlement systems.

tives transactions and margining for central counterparties.

There are five collateral management products:

triparty repo; Custodial services, such as the monitoring and processing of income, corporate events, tax reclaim or relief at source. triparty securities lending; triparty derivatives support; triparty secured loans; and triparty exchange and netting support. Services to assist issuers, lead managers and issuing and paying agents with the procedures for distributing new issues against or free of payment. These services cover syndicated distribution (distribution by lead managers), or the non-syndicated procedure (distribution by issuing agents). Securities lending and borrowing Enables clients to borrow securities to avoid failing to deliver securities, both in batch and real-time settlement. Lenders with available positions can use this service to increase the yield on their securities portfolios.

Asset optimisation Asset optimisation

Communications

Money transfer Cash can be transferred in and out of the system in any of the 30 or so eligible settlement currencies, offering clients a means of efficient cash management mostly on a same-day basis.

Screen-based access Allows real-time validation and matching and immediate comprehensive feedback, and comprises:

Computer-to-computer access Euroclear Bank offers the following communications channels:

EUCLID Server Plus; Internet-based applications FundSettle: internet-based browser that gives easy access EUCLID file transfer and FundSettle file transfer; and SWIFT.

Banking services Uncommitted secured credit facilities allow clients to enhance their settlement efficiency and avoid unnecessary settlement fails.

to FundSettle; or

Triweb and Biweb: internet reporting tools that provide information on Integrated Collateral Management.

Software applications EUCLID PC Plus is a Windows-based software application, and is the most cost-effective way to access all services.

Euroclear Bank SA/NV 1 Boulevard du Roi Albert II B-1210 Brussels, Belgium Tel: +32 (0)2 224 1211 www.euroclear.com

Euroclear is the marketing name for the Euroclear System, Euroclear plc, Euroclear SA/NV and their affiliates. 2005 Euroclear SA/NV

Euroclear France
Office: Paris Established: 1949 as Sicovam Merger with Euroclear: January 2001 Clients: Over 300, representing French and some foreign financial institutions

Euroclear France is the CSD of France and the operator of the Relit+ and RGV settlement systems.

The custody service range covers:

Issuer, custody and settlement services comply with the security

debt instruments; equities and related instruments

and efficiency recommendations laid down by international bodies such as the G30 and International Securities Services Association (ISSA).

Services are offered in the areas of: custody (physical and book-entry); securities and cash settlement; matching and trade confirmation between counterparties and custodians; collateral management; and a wide range of issuer services.

(ETFs, warrants); funds; and international securities.

In addition to recognised CSDs, Securities are held in the system in either dematerialised or physical form, through a foreign depository. banks, brokers, foreign institutions and other entities1 can be direct members.

listed in the Euroclear France operating rules and general rules of the Conseil des Marchs Financiers

Settlement

Asset servicing

RGV (irrevocable) and Relit+ (revocable), the two settlement platforms, handle all types of backoffice operations, and offer:

Safekeeping Effective custody services and total security of holdings:

Income and redemptions For all securities eligible for the direct payment procedure. An efficient service that facilitates

real-time securities information; stock exchange and OTC settlement; DVP and FOP settlement; real-time and overnight processing; and internal book-entry and cross-border settlement. specific asset management possibilities, with a sub-accounting system for bearer and registered securities; optional segregation of assets (up to end-investor level); and secure accounts organisation based on double-entry book-keeping.

income and redemption payments on the due date.

Shareholder identification For securities in bearer form The TPI (Titre au Porteur Identifiable/ Identifiable bearer security) service allows issuers of bearer securities to request and receive detailed

Corporate actions management Fully automated corporate actions management:

information on the identity of their shareholders.

For securities in registered form execution of corporate actions; market claims management; and real-time reporting. Allows issuers of registered securities to receive information on a continuous basis concerning any change in their shareholders.

Asset optimisation

Communications

Collateral management A global collateral management solution is offered, allowing clients to meet all liquidity needs from a single pool of assets.

E2A An innovative Internet Protocol (IP) based communication architecture offering direct access to the settlement system. The E2A application:

Money transfer Euroclear France has a direct link, via RGV, with the TBF and TARGET systems, ensuring smooth cash settlement of securities transactions and asset management.

provides users with a choice of communications channels, due to the range of IP network providers; allows users to communicate via file transfer and/or MQSeries; and communicates with different platforms; currently Relit+ and RGV.

Refinancing Clients can carry out refinancing transactions quickly and safely using the RGV system, whilst benefiting from services to optimise refinancing transactions and Monetary Policy operations. It also allows the funding of cash accounts with intra-day liquidity. eRGV The eRGV system is a new version of the RGV workstation, allowing access to the settlement system via an IP network. It has been designed to make optimum use of the Relit+ and RGV systems, via the internet.

Euroclear France SA 115, Rue Raumur F-75081 Paris, Cedex 02, France Tel: +33 (0)15534 5534 www.euroclear.com

Euroclear is the marketing name for the Euroclear System, Euroclear plc, Euroclear SA/NV and their affiliates. 2005 Euroclear SA/NV

Euroclear Nederland
Office: Amsterdam Established: 1977 as NECIGEF Merger with Euroclear: May 2002 Clients: Around 100, representing Dutch and foreign banks

Euroclear Nederland1, the CSD of the Netherlands, provides real-time settlement, custody and securities administration services for capital market paper and money market paper.

Securities are accepted in bearer and registered form and all types of equities are eligible for (giro) transfer.

All securities transactions effected are subject to Dutch law and take place in compliance with the Giro Securities Act. The Authorities

Custody services are offered for:

Financial Markets, and the Ministry of Finance supervise all activities,

equities; Giro-based securities traffic is managed on behalf of clients, as defined under the Wet Giraal Effectenverkeer (Securities Giro Act), including: warrants; commercial and government bonds; and commercial and government money market paper.

and De Nederlandsche Bank N.V. (DNB), the Dutch Central Bank, monitors systemic risk.

In addition to recognised CSDs, Dutch credit institutions and foreign clients (in possession of a European

the registration of master data; account administration; and transactions settlement.

passport) active in capital market paper and/or money market paper can be direct participants.

Euroclear Nederland is the business name for the Dutch Central Securities Depository, the Nederlands Centraal Instituut voor Giraal Effectenverkeer BV, formerly known as NECIGEF

Settlement

Asset servicing

The settlement of transactions is carried out using DVP model 1. Instructions are settled for both securities and funds on a tradeby-trade basis, with delivery and payment occurring simultaneously.

Cash settlement of securities transactions takes place in central bank money, and is conducted via the cash accounts of DNB in euro or, in the case of foreign currencies, via Kas Associatie NV.

Safekeeping Most Dutch securities are immobilised in the vaults of Euroclear Nederland and its subsidiary Euroclear NIEC (Nederlands Interprofessioneel Effecten Centrum), which also holds registered shares

Operations are carried out exclusively on the basis of gross settlement (trade-for-trade settlement) for OTC transactions. Euronext stock exchange transactions and the resulting feed from LCH.Clearnet are netted.

and Dutch lottery bonds.

Third party custodians/depositories are only used for safekeeping of certain dual-listed and international securities.

Securities transactions are settled on a real-time basis. Consequently, reports to clients on the status of their instructions are also provided in real time.

Income and redemptions Administration of the cashing and settlement of coupons, cash dividends and redemptions (income and capital) as well as mandatory conversions.

Communications

Market claims management Claims from cum-ex deliveries for clients are dealt with and, in the case of optional conversions, the conversion rights are determined and allocated. Clients exercise these rights themselves.

Clients are offered the possibility of communicating either:

via SWIFT ISO 15022 using the standard SWIFTNet FIN network infrastructure; or

by logging on to an online Issuer services Issuers are assisted in relation to the optimal choice of denominations and receive help to follow the administrative and operational procedures relating to a new issue. terminal which provides remote access via the SWIFTNet webstation.

Euroclear Nederland Beursplein 5 NL-1012 LM Amsterdam The Netherlands Tel: +31 (0)20 530 1500 www.euroclear.com

Euroclear is the marketing name for the Euroclear System, Euroclear plc, Euroclear SA/NV and their affiliates. 2005 Euroclear SA/NV

CRESTCo
Office: London Established: 1993, start of operations in 1996 Merger with Euroclear: September 2002 Clients: 275 users who act for over 40,000 corporate and individual members of CREST

CRESTCo is the CSD for the UK and Ireland, and operates the CREST system.

CRESTCo is regulated by the UKs Financial Services Authority. CREST is one of the most efficient systems worldwide and is a leader in settle-

Advanced, low-cost settlement facilities are provided for a wide range of corporate and government securities, including those traded on the London and Irish Stock Exchanges and virt-x. CREST also settles money market instruments and funds, plus a variety of international securities.

ment risk reduction.

Membership is available for firms and for individuals.

Settlement

Asset servicing

CREST provides real-time settlement (on trade date if required) allowing users to monitor and manage their transactions throughout the day.

Optional settlement netting is available for trades executed through the London Stock Exchanges SETS platform, cleared through the LCH.Clearnet service, and settled in

Full corporate action services are offered, as well as a range of services for registration and new issues:

automated production of market claims; automatic transformations of open transactions during company

DVP in central bank money is provided, with simultaneous and irrevocable transfer of cash and securities (DVP model 1).

CREST. The same service is also available for virt-x trades in UK securities.

Direct links to US and European settlement systems allow settlement

reorganisations and buyer protection for all relevant events; and the possibility for users to electronically appoint and instruct proxies at company meetings.

Full legal title is transferred at the point of settlement for all UK registered shares and government bonds.

in 18 international markets.

Credit facilities are provided by a range of commercial payment banks, and multiple currencies are supported (currently GBP, EUR and USD).

A new facility has been introduced to distribute income payments and associated dematerialised tax vouchers.

Calculation and collection of stamp duty from members on behalf of the Inland Revenue and the Irish Revenue Commissioners. Tax assistance, including a foreign withholding tax reclaim service, is also available as part of the international service.

Asset optimisation

Asset optimisation

Communications

A central counterparty service for electronically executed trades on SETS and SEAQ Crosses is operated together with LCH.Clearnet and the London Stock Exchange. This delivers full counterparty anonymity and improved counterparty risk protection by introducing LCH.Clearnet as the central counterparty to the market. A similar central counterparty service is available for virt-x trades in UK securities.

A full and flexible stock borrowing and repo functionality is offered. Same-day settlement is handled, allowing firms to arrange, execute and settle their borrowing needs within a matter of minutes. Daily stock lending and settlement performance data is available on the CRESTCo website as a subscription service.

Firms with the hardware and software to connect directly to our system are known as users. A firm can also connect through a user as a sponsored member.

Users can communicate via any of the three currently accredited networks to exchange electronic messages.

Members are able to obtain reports on open positions and liquidity

Users can access the system via:

Financing is available from third parties using transactions known as Deliveries by Value (DBVs).

projections.

file transfer or MQSeries messaging, using standard ISO 15022 or CREST proprietary messaging; or a PC-based Graphical User Interface (GUI) software, which gives access to the full range of CREST functionality.

Communications

Users can connect from their own back-office systems with interfaces developed by themselves or commercial software providers.

CRESTCo Ltd 33 Cannon Street GB-London EC4M 5SB United Kingdom Tel: +44 (0)20 7849 0000 www.crestco.co.uk www.euroclear.com

Euroclear is the marketing name for the Euroclear System, Euroclear plc, Euroclear SA/NV and their affiliates. 2005 Euroclear SA/NV

Euroclear SA/NV Euroclear Bank SA/NV 1 Boulevard du Roi Albert II B-1210 Brussels, Belgium Tel: +32 (0)2 224 1211 Euroclear SA/NV Euroclear France SA 115, Rue Raumur F-75081 Paris, Cedex 02 France Tel: +33 (0)15534 5534 Euroclear SA/NV Euroclear Nederland Beursplein 5 NL-1012 LM Amsterdam The Netherlands Tel: +31 (0)20 530 1500 Euroclear SA/NV CRESTCo Ltd 33 Cannon Street GB-London EC4M 5SB United Kingdom Tel: +44 (0)20 7849 0000

www.euroclear.com

Euroclear is the marketing name for the Euroclear System, Euroclear plc, Euroclear SA/NV and their affiliates. 2005 Euroclear SA/NV