CACEIS NEWS 36

The Asset Servicing Journal

JANUARY 2014 n o. 36

www.caceis.com

CACEIS’s AIFMD regulatory reporting: Efficiently achieving compliance p.5

CACEIS will support BPCE Group in the clearing and processing of OTC derivatives p.4

CACEIS launches execution services p.5

philippe leprince, caceis

christophe lebrun, BPCE

gilles de foucault, caceis

CACEIS in Luxembourg leverages clients’ market opportunities in Europe’s Premier Investment Fund Centre Luxembourg may be small in terms of population and geographical surface area, however, on the world stage, this diminutive country is a financial powerhouse with a reputation for quality, stability and the competitiveness of the investment fund industry in particular. p.2 CACEIS serves clients out of a new branch in Italy Following the granting of a banking license by the Bank of Italy on 21 January 2014, CACEIS has opened a Milan-based office to service clients active on the Italian market. p.3 CACEIS provides its clients with Trade Repositories reporting delegation The EMIR reporting obligation for all derivative contracts to Trade Repositories will start on 12 February 2014. p.4 CACEIS will be a directly connected participant in T2S The T2S implementation timetable has been confirmed. CACEIS will offer its clients a single access point to all European markets through a direct connection that will improve the processing of instructions and make settlement more efficient. p.6 CACEIS activities audited under the ISAE 3402- SSAE16 standards CACEIS is dedicated to achieving the highest quality standards for custody and fund administration through the rigorous annual processes of ISO 9001 certification and ISAE 3402 – SSAE16 auditing. p.7

Taking Stock of Past Achievements and Future Challenges

CACEIS will shortly be releasing its finan- cial results, and I am pleased to announce that once again, we can post a healthy set of financials which demonstrate the profitabil- ity of our group and therefore indicates our ability to invest in the staff, IT tools and in- dustry research that provide the best return on investment and highest added value for our clients. Our sales figures have a lot to do with this state of affairs, and the fact that our sales teams have not only met, but exceeded their targets is testament to our ability to cre- ate compelling sales offers led by the quality of our services, the reliability of our systems and the broad range of our products. CACEIS’s profitability is not however achieved through growth alone, and our reputation for having some of the best con- trolled costs in the industry is evidenced by our ongoing programs of systems and IT tool consolidation across group entities, as well as increased efficiency within our own operational centres by the creation of dedi- cated centres of excellence designed to serve clients group-wide. Shifting our focus ahead to 2014, many in- dustry commentators take a pessimistic view of the coming twelve months, forecasting a very challenging environment driven by reg- ulatory initiatives, ever increasing fee pres- sure, and stagnant interest rates. However, despite the business environment’s possibly gloomy outlook, CACEIS will keep up its program of investment to offer new services and enhanced products for its clients. Finally, throughout 2013, CACEIS has dem- onstrated its commitment to supporting cli- ents’ growth, and as a significant portion of CACEIS’s own growth is due to the continued success of our clients, I would like to take this opportunity to thank them ■

group, but we have also upgraded to new, in- dustry leading software that will bring many benefits to our clients in this growing sector of the investment industry. CACEIS has also recently gained banking licences in Belgium and the Netherlands which allow us to significantly extend the scope of our operations in these countries, to offer custody and depositary services as well as related services in addition to the ex- isting fund administration offer. This move clearly demonstrates our commitment to our clients in these regions and will be a key factor in our ability to win new client man- dates over the coming years. In terms of the group’s geographic expan- sion, CACEIS has also added two new juris- dictions to its global network, both of which are key to our future business development plans. We have taken the decision to create a CACEIS entity in Italy, which opens with a strong existing client base and competent servicing staff. By bringing CACEIS’s broad asset servicing experience to clients in Italy, we are in a strong position to grow the en- tity’s client base by attracting large players that wish to benefit from our group’s inter- national servicing expertise. We have also opened a representative office in London, which is a very significant step for CACEIS, that puts a greater accent on the international character of the group in order to attract and retain a larger number of clients from English-speaking jurisdic- tions. This move is part of our broader stra- tegic plan to better meet the needs of UK, Irish, US and Canadian clients, and involves the appointment of a dedicated Regional head who is responsible for the zone’s de- velopment, and who serves on the group’s Executive Committee.

François Marion, Chief Executive Officer

L ooking back over 2013, I would like to highlight two major developments that I believe define the year for CACEIS - firstly, the expansion of our product and service offering and secondly, the extension of our geographic coverage. The launch of ‘Prime Fund Solutions’, our new business line that brings together the electronic execution and clearing & collater- al management solutions for derivatives that is integrated with our custody and adminis- tration services across the group, represents a major milestone in the group’s ambitious plans to expand its services in derivatives. It responds, with a single point of contact and industry leading software, in a coordinated manner to the challenges faced by clients op- erating under EMIR and MiFID II. Another important enhancement of our service of- fer was in the Private Equity and Real Estate sphere, where we have not only restructured our teams to create a number of centres of excellence, available to clients across the

products and services

2 caceis news - No. 36 - January 2014

CACEIS leverages clients’ market opportunities in Europe’s Premier Investment Fund Centre

A s a large international group serving many regions worldwide, CACEIS has developed an extensive network of offices designed to serve its clientele with an enhanced level of proximity. Luxembourg is number one when it comes to cross-border distribution of funds managed mainly abroad by international investment companies. CACEIS in Luxembourg gives them its support to drive clients’ global fund business forward. They can also benefit from the whole range of services offered by the CACEIS Group. The Grand Duchy - international finance centre The domestic financial market in Luxem- bourg is small and would hardly register when compared to that of its neighbour- ing states of Germany, France and Belgium. However, it is Europe’s premier investment fund centre (and second global fund cen- tre after the US) and is the leading wealth management centre of the Eurozone. Today, Luxembourg is home to 147 banks from 26 countries, including the US, China and Japan as at December 2013. In terms of investment funds managed under Luxembourg law, the Grand Duchy accounts for some €2.6tr in assets and 3,890 funds as at end October 2013 which represent over a quarter of the European investment fund industry. Luxem- bourg’s also ranks in first place in terms of cross-border fund distribution. It accounts for nearly three quarters (72%) of the invest- ment funds sold internationally. The UCITS directive was the legislation that kick-started the Grand Duchy’s investment fund indus- try, and was confirmed with the launch of

Luxembourg may be small in terms of population and geographical surface area, however, on the world stage, this diminutive country is a financial powerhouse with a reputation for quality, stability and an internationally- focused investment fund industry.

the 4th and the forthcoming 5th iteration of the Directive. CACEIS and Luxembourg – Centres of Excellence CACEIS’s services in Luxembourg respond to the increasingly international character of the fund industry and its clients’ busi- ness. Historically, CACEIS in Luxembourg has provided custody, depositary and fund administration services but the Group has over the years elected to develop a number of its many product and operational centres ▷ Private Equity and Real Estate Servicing, ▷ UCITS Management Company services, ▷ Fund Distribution Services, ▷ OTCDerivatives and Structured Products ■ of excellence in the country: ▷ Dealing room activities,

“The outlook for the Grand Duchy of Luxembourg and CACEIS itself is positive, with the global fund industry regaining much of the confidence and assets it lost during the crisis. All clients benefit from the solid foundation and recognised expertise of CACEIS in Luxembourg”.

Pierre CIMINO, Managing Director of CACEIS Bank Luxembourg and Responsible for Entities in Belgium, the Netherlands, Italy and Hong Kong.

CACEIS has recently seen a major step forward in the evolution of its business, as Banque Privée Edmond de Rothschild Europe in Luxembourg announced that it has chosen to enter into exclusive negotiations for a final agreement to transfer a complete branch of business (custody, fund administration and transfer agent activities) as well as the related staff to the Luxembourg entity.

© iStock

UCITS MANAGEMENT COMPANY SERVICES

PRIVATE EQUITY AND REAL ESTATE servicing

DEALING ROOM ACTIVITIES

CACEIS’s dealing room, which has a strong reputation in the market, is based in Luxembourg and carries out securities lending, forex, collateral management and treasury activities for clients throughout the global CACEIS network. With a bespoke service design, the team enables clients to respond to ongoing market challenges while enhancing investment performance and ensuring operational efficiency with fully integrated servicing components.

CACEIS in Luxembourg administers private equity and real estate business thanks to a dedicated team with a specialised knowledge and experience. The team has a clear understanding of the specific servicing needs of these non-traditional investments. CACEIS ranks among the premier global service providers for these products, creating bespoke servicing solutions for clients, ranging from small boutique operations to some of the world’s largest financial institutions.

CACEIS has developed the Luxcellence Management Company to cater to the many funds that are domiciled and distributed out of Luxembourg under UCITS. Luxcellence is a UCITS IV-compliant, plug-and-play solution for institutional clients seeking substance and compliance services for funds. It provides capital adequacy requirements assistance, regulatory report drafting and filing, an independent local infrastructure, compliance support and comprehensive risk management.

Marie-Victoire Menez , Managing Director, Luxcellence Management Company

Gilles Normand, Group Treasurer, CACEIS

Pascal Hernalsteen, Head of Private Equity and Real Estate Servicing, CACEIS

“Through a consultative approach, our dedicated dealing desk team develop creative ways to help delivering on strategic objectives, preserving capital and achieving optimal risk-adjusted returns. Our services are

“Private equity & real estate is an expert market where the right skills, experience and resources are vital to succeed. By combining customised solutions for a broad spectrum of private equity, real estate, infrastructure and debt

“Luxcellence services are designed to suit many different client needs, froma stand- alone riskmanagement solution to a fully-fledged

management company offering. Luxcellence has developed expertise and a complete range of services adaptable to different management profiles, leveraging the experience it has acquired from international managers in conventional and alternative vehicles. With Luxcellence, clients enjoy the benefit of economies of scale and customisable solutions that are immediately operational.“

designed to incorporate a high level of flexibility. The emphasis we put on gaining a thorough understanding of the business practices ensure that our solutions are a perfect fit in unique and changing requirements.”

structures and strategies, with assistance from the initial fund set-up to its daily administrative needs, we give managers the confidence to create new products, thereby adding real value to their business.“

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No. 36 - January 2014 - caceis news 3

CACEIS serves clients out of a new branch in Italy

new business

Pioneer Investments CACEIS is Pioneer Investment’s asset servicing provider of choice for the launch of its first French law fund, managed as part of an exclusive partnership with Banque Neuflize OBC. CACEIS provides Pioneer Investments with a wide range of services: custody and depositary functions, fund administration and the production of financial and regulatory reports. It also manages the fund’s corporate governance and legal affairs. Joseph Saliba , Deputy Chief Executive Officer at CACEIS, said: “We are proud to have been selected as the asset servicer for Pioneer Investments’ first UCITS IV French law fund. It demonstrates the quality of our offering and our visibility among major international fund managers. It also serves to strengthen our long-term partnership with Neuflize OBC.” Buss Capital German investment manager, Buss Capital GmbH & Co. KG, has selected CACEIS to provide depositary services for its funds managed under the new KAGB regime. Based in Hamburg, Buss Capital is the market leader for closed-end shipping container funds in Germany, having launched 29 mutual funds, four private placements and eight direct investments. “Our aim was to select an experienced depositary services provider to enable us to meet the KAGB regime’s obligations while focusing ourselves on asset management. We have found what we require in CACEIS,” said Dr. Dirk Baldeweg , Executive Director of Buss Capital. SachsenFonds SF Institutional Invest GmbH, the investment management company of SachsenFonds Group, has mandated CACEIS to provide depositary services for its Alternative Investment Funds (AIFs). SF Institutional Invest GmbH is specialised in the management of real estate assets and development projects linked to renewable energies. “CACEIS is an experienced partner in the closed- end fund industry and has available comprehensive know-how in those asset classes, which are important to us” , said Jürgen Gobel , managing director of SachsenFonds Group. Publity Performance The German asset manager, publity Performance GmbH, has mandated CACEIS to act as depositary for its real estate mutual funds. The Leipzig- based parent company, publity AG, primarily invests in commercial real estate as well as in business premises and residential houses in German metropolitan areas such as Frankfurt am Main, Hamburg and Munich. CACEIS was awarded the mandate on the strength of its expertise in the field of real estate fund servicing: “We are delighted with the high quality of the service package CACEIS brings to the deal, and we especially appreciate the smooth onboarding process that the group provides in Germany”, stated Thomas Olek , CEO of publity AG ■

Contacts: Giorgio Solcia, Managing Director giorgio.solcia@caceis.com Roberto Colapinto, Head of Regional Coverage roberto.colapinto@caceis.com

Address: Piazza Cavour, 2 I-20121 Milano + 39 02 72 17 44 11

© Ivan Floriani - Fotolia.com

Following the granting of a banking license by the Bank of Italy on 21 January 2014, CACEIS has opened a Milan-based office to service clients active on the Italian market. In line with the group’s business development strategy implemented across its other global offices, CACEIS will bring the full range of service offerings and expertise to clients operating on the Italian market. The entity, managed by Giorgio Solcia, relies on a well-established and efficient local investment servicing and relationship management team. This office counts with a large institutional client base of investment and management companies and already ranks as 4th largest third-party real estate servicing provider in Italy ■

OTC DERIVATIVES AND STRUCTURED PRODUCTS

FUND DISTRIBUTION SERVICES

CACEIS in Luxembourg acts as the operational hub for the entire group’s clients’ fund distribution support needs. These services are key to assisting clients who are distributing investments on a cross-border basis, and Luxembourg’s global business outlook makes it the ideal location in which to base such activities. Whether it is support for initial registration or distribution network management, trailer fee calculation and payment or consolidated reporting, the FDS team is able to design bespoke services that are modular and can be adapted to their evolving business needs.

Luxembourg is one of CACEIS’s competence centres for complex product pricing, where teams with expertise in quantitative financial economics and mathematics perform the intricate financial modelling of structured products in the IT systems. CACEIS relies on integrated market leading platforms for its complex OTC derivatives pricing service.

Cyrille Prigent, Head of Operational Line - Banking Services, CACEIS

LaurentMajchrzak , Head of Operational Line - FDS, CACEIS

“For over 10 years, and across more than 35 countries, we have provided customised solutions for domestic and cross-border fund distribution. Today, CACEIS has become a key business partner for asset managers and

“CACEIS is one of Europe’s leading valuation agents for OTC derivatives and structured products. The expertise of our staff, our reliable data sources and powerful IT platforms specifically designed to automate

the valuation and controls process, has led to a true industrialisation of the OTC derivatives pricing function. Structured products do not lend themselves to industrialisation and CACEIS is one of only a handful of providers with the capability to truly understand and effectively price such products.”

distributors seeking an efficient way to take advantage of distribution opportunities both in their home markets and abroad, and grow their business.“

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4 caceis news - No. 36 - January 2014

CACEIS provides its clients with Trade Repositories reporting delegation

The EMIR reporting obligation for all derivative contracts to Trade Repositories will start on 12 February 2014. C ounterparties will be required to re- port both over the counter (OTC) and exchange traded derivatives (ETD) including any outstanding or entered trade into or after 16 August 2012 (when EMIR

came into force). Trades must be reported at T+1. One of the main purposes of the EMIR reporting obligation is to enable the authori- ties to identify and analyse risk positions. The new reporting obligation to Trade Repositories requires two types of data: ▷ The Legal Entity Identifier (LEI) includes details regarding the parties to the derivative contract; ▷ The main characteristic of the derivatives contract (Type, underlying asset, notional value, the valuation of the contracts and of

the linked collateral, etc.) and the Unique Trade Identifier (UTI) to enable ESMA to record the trades. CACEIS can report either on behalf of a cli- ent (simple delegation) or a counterparty which would receive a delegation from its client (double delegation). All changes during the OTC traded deriva- tives contract’s lifecycle are reported to the Trade Repositories within the T+1 deadline. Thus, CACEIS helps its client to comply with the EMIR reporting obligation and to reduce their administrative burden ■

david celeste, Head of OTC Derivatives, CACEIS

CACEISwill support BPCE Group inthe clearing and processing of OTC derivatives Christophe Lebrun, Head of EMIR project – BPCE Group Finance Department

What does EMIR involve for the BPCE Group and its entities (regional Banques Populaires and Caisses d’Epargne)? The first concern for the BPCE Group is to be EMIR- ready within the regulatory timeline. Regulations on some issues have developed over time and we have therefore had to

flexible management of both clearable and non-clearable OTC derivatives. Involving CACEIS in our derivatives processing chain will enable us to meet EMIR requirements on measuring, supervising and reducing operational and counterparty risk. As regards bilateral contracts, CACEIS provides a range of modular services including: daily valuation of derivatives, counterparty reconciliation, initial and variable margin call calculation and collateral management services, which will be used by most BPCE group entities that will clear their transactions. This choice was made by the entities with the aim of simplifying and optimising derivatives processing through standard processes that interface with CACEIS, which will be the central contact point for the entities in their relations with the clearing brokers and CCPs. Some Group entities will use CACEIS to report their exchange-traded and OTC derivatives to a trade repository when this requirement takes effect on 12 February 2014 ■

CACEIS OTC DERIVATIVES SERVICE - OVERVIEW

be fully ready and able to anticipate and adapt. Apart from the regulatory issue, the Group wanted to use these developments as a lever to adapt and rationalise its derivatives processing function. After a scoping study, financial impacts analysis and definition of the target organisation, the Group has evolved its operating model by upgrading its systems and harmonising the associated processes. For example, connecting all Group entities to Markit, the electronic trading platform for derivatives, will enable us not only to abide by the very short confirmation deadlines imposed by EMIR but also to implement the technical standards required to automate the OTC derivatives processing chain. The requirements on reporting to trade repositories have also prompted the BPCE Group to develop a systematic, standardised reporting solution for derivatives transactions. All these measures aim to give the Group an effective secure management system in a new, highly demanding environment. Do you think the clearing requirement for standardised OTC derivatives and the collateralisation requirement for bilateral contracts will reduce counterparty risk? Yes, the central counterparties (CCPs) will play a crucial role in reducing counterparty risk through three mechanisms: novation, initial and variable margins (IM, VM) and default management procedures. However, they will need to have the requisite resources and highly sophisticated risk management systems required by the regulations (EMIR in Europe and Dodd-Frank Act in the USA) to protect the markets they serve. The Group is particularly attentive to this issue as the majority of its OTC derivatives transactions involve instruments that will clear in SWAPCLEAR as of September 2014. BPCE has selected clearing brokers and opted for a segregation of accounts by entity to minimise risks. At the same time, the collateralisation requirements for bilateral OTC derivative contracts and Basel III capital requirements for this type of transaction will also help reduce counterparty risk. In addition, requirements regarding risk mitigation techniques and reporting to trade repositories will strengthen security and improve transparency of the derivatives market. How does CACEIS support BPCE Group to clear and process OTC derivatives? What are the main services in terms of measuring, supervising and reducing operational and credit risk? The BPCE Group has selected an operating model that focuses on scaling up processes and automating the derivatives processing chain whilst enabling

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No. 36 - January 2014 - caceis news 5

CACEIS launches execution services CACEIS is providing its buy-side clients with direct connectivity to electronic markets for their equity and listed derivatives trading. CACEIS offers easier access to liquidity, a best-execution guarantee and broker neutrality.

trading or post-trade matters. The team has trad- ing experience with all types of clients - both buy and sell side - and expertise in a range of areas (including markets and IT), with a sharp focus on commercial relationships. As a result, clients get an immediate solution to their problems, which is crucial in this business. The experts can also sup- port clients with customised additional services, such as accounting relating to CSAs (Commission Sharing Agreements) and TCAs (Transaction Cost Analysis).” CACEIS provides connectivity (via the FIX pro- tocol) to electronic markets, crossing networks, and algorithmic models. With this available open configuration, end-clients remain free to select any financial information providers and brokers - either single or multiple - they wish. CACEIS can provide a turn-key white-labelled solution. Its integrated execution offering for equities and listed derivatives includes all liquid- ity pools, i.e. traditional markets, MTFs and dark pools. Best-execution and best-selection reportings round out the service, which is ide- ally suited to dealing with the increasing frag- mentation of market infrastructures and with regulatory constrains. CACEIS enables asset managers to modernise their workflows, achieve full STP, improve ac- cess to liquidity, minimise trading costs and reduce operational risks. Its resources enable buy-side clients to optimise their investment strategies and gain increased control over execu- tion as part of a MiFID-compliant framework ■ A single connection covering all markets

Clients benefit from: ▷ Large-scale technical and human resources, ideally suited to handling major managerial and regulatory changes (MiFID II, AIFMD, UCITS IV), including a full audit trail and the ability to set up pre-trade compliance controls (risk constraints, management and regulatory ratios), along with best-execution and best-selection reporting; ▷ Applications maintenance and IT back-up services, along with a Business Continuity Plan; ▷ Greater responsiveness in terms of trading new instruments, since CACEIS’s information systems can be easily adapted to handle growth in their business; ▷ A high level of STP due to a fully integrated and automated processing value chain, which increases security and reliability and reduces operational risk.

T he main distinguishing features of CACEIS’s execution services are the fo- cus on client relationships applied by its dedicated specialists and the integration of direct connectivity to electronic markets in its global comprehensive post-trade offer covering settlement, custody, fund administration and depositary bank services. Philippe Leprince , Head of Execution Services, has over 20 years of experience in execution services. He emphasises that “people think that electronic trading leaves no room for human in- teraction, but actually it’s a service business where personalised support is vital. Given constant changes in technology and regulations, clients expect providers to guide them and understand their needs. I firmly believe that service is one of the most important aspects. At CACEIS, clients can speak to their dedicated contact person on the execution desk on issues relating to technology, philippe leprince, Head of Execution Services, CACEIS

CACEIS’s AIFMd regulatory reporting EFFICIENTLY ACHIEVING compliance Gilles de Foucault, Product Manager, CACEIS

What about the new AIFM regulatory

within the EU. Following the first reporting package, AIFMs will have to meet their obligations in accordance with article 24 of the AIFM directive. The reporting frequency will then be quarterly, half-yearly or annually depending on the assets under management and whether leverage is used or not. What are the components of the AIFM regulatory reporting? The AIFM reporting is common to all AIFMs and AIFs, and includes three major categories of information: general AIFM-level data, such as the main instruments and market traded or main positions taken, detailed information on the composition of funds and, where the AIF makes significant use of leverage, specific information on the use of such leverage. In concrete terms, some data needs to be consolidated at the level of the AIFM, other needs to be coded and formatted as requested by the regulator and, finally, some needs to be calculated. “Level 2” regulation has made it possible to clarify a number of issues, particularly the calculation of assets under management and the effect of leverage. Technical details have been clarified by ESMA in 2013. How does CACEIS support its AIFM clients in producing their regulatory reports? CACEIS offers an AIFM reporting product to help its clients complying with their new obligations. This is intended both for managers wishing to retain management of the process of producing their AIFM reporting package and for AIFMs managing a limited range of AIFs who wish to outsource all of their AIFM reporting. In practice, a significant part of the AIFM reporting may be fed from accounting data and the AIFM’s registrar. Among these are reference data for the management company and its funds, inventory valuations, history of portfolio changes, and subscriptions and redemptions over the reference period. CACEIS will also be able to provide a number of simple and complex calculations to define the AIFM’s contribution to AIF risk management reporting. Note also that where the AIFM already outsources risk management in whole or in part to Luxcellence, CACEIS’s UCITS IV compliant plug-and-play solution for investment companies, CACEIS is able to populate the AIF’s market and liquidity risk infirmation in the AIFM reporting package ■

reporting and what

are its main objectives? The AIFM directive imposes on

AIF managers, whether AIFMs authorised or not, which manage or distribute AIFs in the European Union, a new

obligation of periodic reporting to regulators with regard to their investments, leverage and exposure. This reporting package will have to be delivered in January 2014 at the earliest. One of the main AIFM regulatory reporting objectives is to make it possible for European regulators to monitor systemic risks. ESMA will then be able to make recommendations on systemic risk prevention to the competent national authorities which will, in turn, be able to impose limitation to the leverage an AIFM. How are the nature and frequency of AIFM reporting to competent national authorities determined? The nature and frequency of reporting obligations depend mainly on the assets of the AIFs managed by the AIFM, and whether leverage is used or not. Delivery of the first reporting is subject to specific arrangements. ESMA recommends that the first report period should start on the first day of the quarter following the AIFM’s authorisation and end on the last day of the reporting period. However, this recommendation refers to national regulators’ decisions in respect of definition of the first reporting date, opening the way to different situations

REGULATION

6 caceis news - No. 36 - January 2014

The T2S implementation timetable has been confirmed. CACEIS will offer its clients a single access point to all European markets through a direct connection that will improve the processing of instructions and make settlement more efficient. CACEIS will be a directly connected participant in T2S

Market infrastructures

Settlement cycle shortened from T+3 to T+2 The Central Securities Depository Regulation (CSDR) proposed by the European Commission involves harmonising market practices in order to complete the TARGET- 2 Securities (T2S) project. In this perspective, The CSDR provides that the settlement cycle must be shortened from T+3 to T+2 by 1 January 2015. CACEIS has taken part in the work done by the financial sector to assess the impact and determine the changeover date for transactions settled on the ESES securities settlement platform (Euroclear France, Euroclear Belgium, Euroclear Nederland). From Monday 6 October 2014, trades on NYSE Euronext or MTFs will be settled on ESES on T+2 (i.e. on Wednesday 8 October 2014 for trades executed on the first day). Over-the-counter (OTC) trades are not impacted by the T+2 settlement obligation. Euroclear UK & Ireland, working with the London Stock Exchange (LES), will also apply T+2 settlement rule from 6 October 2014 ■ LEI: a global identifier for each counterparty The Legal Entity Identifier (LEI) is the result of a G20 initiative supported by the FSB. The LEI is a 20-digit code that provides a single identifier for each legal entity that acts as a counterparty in financial transactions. From 12 February 2014, under the EMIR (European Market Infrastructure Regulation), counterparties will report their trades on OTC and listed derivatives to central trade repositories, including the identifiers of counterparties’ legal entities. Using these worldwide recognised identifiers will give regulators and financial institutions a better picture of how risks are distributed. As regards reporting information to central trade repositories, CACEIS offers its clients a delegated reporting service ■

T ARGET2-Securities (T2S) is the European project to create a platform for settlement in central-bank money, operated by the ECB/Eurosystem. It will short- ly enter the preparation and testing phase for the first migration, which has been confirmed for June 2015. This first phase will concern central securities depositories (CSDs) in Italy, Switzerland, Greece, Romania and Malta. Overall, 24 European CSDs have signed up to T2S. However, the ECB has adopted a migration approach that will spread the ef- fort, and the operational risk arising when systems go live, over four phases between now and February 2017. Benelux, France and Portugal, then Germany and Austria will join T2S in two successive waves in 2016. T2S is a major project for the ECB, for the CSDs and for the national central banks tak- ing part, but also for all the main post-mar- ket participants, including asset account- keepers/depositaries, like CACEIS, in T2S countries.

From the outset of the project, it was agreed that banks and clearing houses (i.e. those sub- mitting settlement instructions) would be able to access the T2S platform either indirectly (via one or more CSDs) or directly. Direct ac- cess is sensible for participants like CACEIS that represent a large volume of transactions and flows from several financial centres. As a result, CACEIS has formally confirmed to the ECB its intention to be a directly con- nected participant in T2S. For several months already, a CACEIS project team has been preparing for these migrations. The team is contributing to large-scale efforts in the financial sector, both Europe-wide and in each country. T2S is a project that CACEIS has always supported, and will be a catalyst for identifying technical and organisational initia- tives that will help CACEIS to adjust and en- hance its service offering. CACEIS will continue to keep its clients regu- larly informed about the main phases of the T2S project ■

eric derobert, Group Head of Public Affairs, CACEIS

First wave 22 June 2015

Second wave 28 March 2016

Third wave 12 September 2016 Clearstream Banking (Germany)

Fourth wave 6 February 2017

Euroclear Belgium

Centrálny depozitár cenných papierov (CDCP) (Slovakia)

Bank of Greece Securities Settlement System (BOGS) Depozitarul Central (Romania)

Euroclear France

KELER (Hungary)

Eesti Väärtpaberikeskus (Estonia)

Malta Stock Exchange

Euroclear Nederland Interbolsa (Portugal)

LuxCSD (Luxembourg)

Euroclear Finland

Monte Titoli (Italy)

Oesterreichische Kontrollbank (Austria)

Iberclear (Spain)

VP LUX (Luxembourg) KDD - Centralna Klirinško Depotna Družba (Slovenia)

SIX SIS (Switzerland)

National Bank of Belgium Securities Settlement System (NBB-SSS)

VP Securities (Denmark)

Lietuvos centrinis vertybinių popierių depozitoriumas (Lithuania)

Source: European Central Bank, September 2013

Timeline

EMIR Reporting for all derivative asset classes – commodities, credit, foreign exchange, equity and interest rates to Trade Repositories is mandatory in Europe (EEA) from 12 February 2014.

MiFID II and MiFIR Agreement reached by the European Parliament and the Council on 14 January 2014. European Parliament: Vote in Plenary expected for 25 February 2014.

february

march

april

may

Retail Distribution Review (RDR)

UCITS V The trilogue phases is expected to begin in advance of the European Parliament elections, due to be held in May 2014.

Central Securities Depositories Regulation European Parliament: Vote in Plenary expected for 4 February 2014.

Packaged Retail Investment Products (PRIPs) European Parliament: Vote in Plenary expected for 24 February 2014.

The Netherlands has adopted plans to introduce a complete ban on inducement payments from fund manufacturers to distributors from January 2014 regarding fund transactions carried out by retail investors. The FCA published a policy statement in April 2013 which bans the payment of commission from product providers to platforms from 6 April 2014 in UK.

EVENTS

No. 36 - January 2014 - caceis news 7

ISO 9001 certifications renewed for custodian banking and fund administration activities in France

CACEIS activities audited under the ISAE 3402- SSAE16 standards

In Belgium, France, Luxembourg, Deloitte performed tests with all teams concerned between November 2013 and January 2014.

The ISO 9001 audit conducted during November 2013 was a success, with many strengths and attributes identified within the certification scope (CACEIS Fund Administration, Middle-Office, Reporting and

I n its reports, the audit firm attests that the controls are in place and effec- tive for all activities covered: Custody, Fund Administration, Transfer Agency, Depositary, Corporate Trust and Dealing Activities of CACEIS. CACEIS adopted the the ISAE 3402– SSAE16 standards applicable to its per- manent control compliance regularisation programme, as soon as they came into force on June 2011: ▷ In North America, CACEIS has obtained the SSAE16 / ISAE3204 standard. The re- sults of the audit were published by Ernst & Young on 21 December 2011. ▷ In Germany, CACEIS’s services also meet

the ISAE 3402 – SSAE16 standards since 2013. High service quality has always been a pri- ority for CACEIS and significant resources are in place to control and monitor all key processes throughout the entire organisa- tion. CACEIS is dedicated to achieving the highest quality standards for custody and fund administration through the rigorous annual processes of ISO 9001 certification and ISAE 3402 – SSAE16 auditing. Both of these quality assessment procedures help to build trust with clients as well as their investors by establishing standardised methods of operation and effective process controls ■

CACEIS Bank France, including Depositary Control).

C ertification body, AFNOR, highlighted cross-functionality at work within and between departments, collaborative im- provement initiatives and employee-oriented actions, each contributing to CACEIS atten- tiveness to customers. The auditors highlighted CACEIS’s reliability, innovation and productiv- ity policy, supported by appropriate manage-

ment and commitment approach of team. The certificate acknowledges the work, profes- sionalism and commitment of each staff mem- ber at CACEIS. This audit brings to a new three-year ISO cer- tification cycle, confirming the ongoing desire of CACEIS to improve the service provided to its clients ■

CONFERENCES Q1 2014

IN THE PRESS Q4 2013

24 January 2014 OPCI 2014 Paris “Cash monitoring & transparency” Walid Mounaouir, Head of Private Equity Real Estate Servicing, CACEIS, France

5-6 February 2014 Fonds’ 2014 Die Schweizer Finanzmesse Zurich 24-27 February 2014 Super Return Private Equity Forum Berlin Chairman, Stream E “ Emerging Markets ” Barry McGloin, Business Development Manager, CACEIS

October 2013 Global Custodian News

20 March 2014 Forumde la Gestion Institutionnelle Paris

“Collateral Express” Laurent Durdilly , Group Product & Solutions Director, CACEIS October 2013 FTSE Global Markets “Alternative Investment Servicing” Serge Weyland , Head of Regional Coverage, UK and North American clients November 2013 Handelsblatt “AIFMD” Holger Sepp , Co-Head, CACEIS, Germany November 2013 InstitINVEST “Accounting roundtable” Philippe Bigeard, Business Development Director, CACEIS December 2013 L’Agefi Hebdo “PMs outsource the Middle-Office” Laurent Durdilly , Group Product & Solutions Director, CACEIS ■

20 March 2014 Morningstar Awards France Paris 25-26 March 2014 EDHEC Risk Days Europe 2014 London “ Measuring Risk Diversification of Indices ” Joe Saliba, Deputy CEO, CACEIS

29-31 January 2014 Context Summit Miami 18-19 February 2014 BSI Summit Frankfurt

26 February 2014 Trends &Morningstar Fund

Summit Brussels

26-28 March 2014 Il Salone del Risparmio Milan 27-28 March 2014 Morningstar Investment Conference Europe Amsterdam

25-28 February 2014 International Transfer Agency Summit (ITAS) Luxembourg Laurent Majchrzak, Head of Operational Line – FDS, CACEIS

31 March – 3 April Morningstar Awards France Hong Kong Laurent Majchrzak, Head of Operational Line – FDS, CACEIS ■

18-19 March 2014 ALFI Spring Luxembourg

19 March 2014 Fund Awards Belgium Morningstar Brussels

Publishing Director: Régine Besnier-Docet - Editor: Philippe Naudé + 33 1 57 78 10 68 philippe.naude@caceis.com - Design: Sylvie Revest Photos credit: Yves Maisonneuve, Yves Collinet, CACEIS; Dominique Amphonesinh; Fotolia - Printer: GRAPH’IMPRIM certified Imprim’vert®. This document is printed on Cyclus paper,

100 % recycled fiber, certified Blaue Engel, Nordic Ecolabel and Ecolabel européen - Number ISSN: 1952-6695 For further information on our products and services, please contact your Business Development Manager. This newsletter has been produced by CACEIS. CACEIS cannot be held responsible for any inaccuracies or errors of interpretation, which this document may contain. www.caceis.com

0 100 200 300 400 500

8 caceis news - No. 36 - January 2014

343

286

238

Worldwide

Europe

Country Focus - Ireland

Italy Focus in the next caceis news

Source: EFAMA - October 2013

Source: EFAMA - November 2013

2002

2003

2004

Worldwide Investment Fund Assets Q2 2013 (€ trillion)

Net assets of the European Fund industry Q3 2013 (€ billion)

Total Assets of Irish Domiciled Funds Q3 2013 (€ billion)

1,400

Investment fund assets worldwide decreased 3.5% during the second quarter to stand at €22.94 trillion at end June 2013.

The combined assets of the investment fund market in Europe, i.e. the market for UCITS and non-UCITS, increased by 3.2% during the third quarter of 2013 to stand at €9,531 billion at end September 2013.

1,200

1,000

800

23.78 22.94

1,318

19.97 20.85 21.42 21.95 22.17

600

1,227

18.58

963 1,055

Country Austria Belgium Bulgaria

€bn 150

Share

400 200

808

749

730

647

1.6% 1.0%

587

435

363

304

93

0

3 5

-

September 2013

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Q3

Q4

Q1

Q2

Q3

Q4

Q1 Q2

Czech Republic

0.1% 1.9% 0.8%

2011

2012

2013

The net assets of Irish domiciled funds reached €1,318 billion in September 2013, representing growth of 7.4% on yearend 2012. These figures demonstrate another strong year for Ireland which saw the industry surpass the significant milestones of €1 trillion in domiciled assets as of yearend 2011. The low 12.5% corporate tax rate is one of the cornerstones of Ireland’s strategy for attracting foreign investment, including the funds industry.

Denmark

181

Finland France

73

1,508 1,361

15.8% 14.3%

Total net assets Type Split - Q2 2013

Germany

Equity

38%

Greece

7

0.1% 0.2%

Hungary

14

Money Market

15%

Irish Domiciled Funds - Breakdown in assets between UCITS &Non-UCITS Q3 2013 (€ billion)

Ireland

1,318

13.8%

Bond

23%

Italy

204

2.1% 0.4%

Liechtenstein Luxembourg

32

Balanced

11%

2,539

26.6%

Other

13%

Non-UCITS €292bn

Malta

9

0.1% 0.7% 0.9% 0.4% 0.3%

Ireland is a major and growing centre for internationally distributed UCITS. UCITS account for 80% of Irish domiciled assets and Irish UCITS are distributed in over 70 countries around the world.

Trends by investment type Q2 2013 (€ trillion)

Netherlands

68 78 41 25

Norway Poland Portugal Romania Slovakia Slovenia

Equity fund assets worldwide decreased 3.6% during the first quarter to €8.7 trillion. Over the same period net assets of bond funds fell 4.8% to stand at €5.4 trillion, whilst net assets of balanced/mixed funds recorded a slight decrease of 0.6% to stand at €2.5 trillion. Net assets of money market funds fell 5.6% during the quarter to €3.4 trillion.

UCITS €1,026bn

4 4 2

- - -

Source: Central Bank of Ireland

Spain

172 194 356

1.9% 2.0% 3.7% 0.2%

Sweden

Irish Domiciled Funds Breakdown by type Q3 2013 (in percentage)

Switzerland

Money Market Bonds Balanced

Equity

Turkey

20

10

United Kingdom

1,070 9,531 6,690 2,841

11.2%

6%

9%

Total UCITS

100.0%

Bonds Equities Hedge Money Market

8

70.2% 29.8%

32%

Non-UCITS

6

21%

4

Equity funds registered strong net asset growth of 7.8% or €173 billion to stand at €2,399 billion at quarter end. Bond fund net assets rose 1.0% or €20 billion to €1,935 billion. Net assets of balanced funds increased 2.0% or €21 billion during the quarter to €1,067 billion. In contrast, money market fund net assets reduced 1.0% or €9 billion during the quarter to € 935 billion. European trends in assets by UCITS type Q3 2013 (€ billion)

Mixed Other

2

7%

0

25%

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

2011

2012

2013

Source: Central Bank of Ireland

Net Sales of Investment Funds Q2 2013 (€ billion)

Total Assets under Administration in Ireland Q3 2013 (€ billion)

Investment funds worldwide registered net inflows amounting to €109 billion in the second quarter, down from €320 billion in the first quarter.

Irish funds industry is now servicing a record figure of €2.5 trillion in assets under administration, an all-time high for the country. This reputation extends not only to Irish domiciled funds but funds based in other jurisdictions including providing administration services to UK, Cayman, Bermudian, BVI and Bahamian investment vehicles.

Money market Bonds Balanced Other (incl.FoF)

Equity

2,400

3,000

2,000

2,500

2,546

369

1,600

2,199

320

2,000

1,878 1,881

1,200

1,653

193

1,500

167

147

1,394

vvv

109

102

99

1,208

83

1,000

800

841 966

636

500

400

489

Q3 Q4 -104

0

Q2

Q3 Q4

2013 Q1 Q2

0

Q1

Q2

Q1

2003

2004

2005

2006

2007

2008

2009

2010

2011 2012 September 2013

Q1

Q2

Q3

Q4

Q1

Q2

Q3

2011

2012

Q4

2011

2012

2013

Split by region of UCITS distribution Q2 2013

Source: Central Bank of Ireland & IFIA

Net Sales of UCITS - Q3 2013 (€ billion)

Net sales of UCITS totaled €34 billion in the third quarter of 2013, up from €12 billion in the second quarter. Uncertainty about bond market developments during the quarter penalized bond funds, whereas equity funds benefitted from improved investor confidence.

Other 2.6%

Irish Administered Alternative Investment Funds (AIFs) Q3 2013 (in percentage)

Brazil 5 . 3%

Australia 5 . 2%

USA 50 . 2%

Ireland is the largest hedge fund administration centre in the world. Ireland services alternative investment assets representing approximately 43% of global hedge fund assets.

132

95

Ireland

78

Europe 28.3%

Rest of World 57%

43%

34

20

12

8

-50

China 1 . 3%

Japan 3.4%

Canada 3.7%

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Source: HFMWeek 19th Survey & IFIA October 2012

2011

2012

2013