dossier rMb | P. 4|5

| LuxeMbourG - THe CenTre For InTernATIonAL rMb buSIneSS In THe euroZone

Dossier rmb

Luxembourg - THe CenTre for InTernaTIonaL

rmb busIness In THe euroZone

rmb

lFF: hoW did the rMb initiative betWeen the governMent and the Private seCtor begin?

nm: The starting point is the internationalisation of the Chinese cur-rency. In my previous job in shanghai I followed this very closely and together with the ministry of Finance we saw the opportuni-ties this could bear for Luxembourg’s financial center. A study that pWC prepared already in 2011 helped us frame our initial efforts and laid the ground for the more comprehensive initiative that was launched the following year.

lFF: WhiCh Partners are involved?

nm: First of all, some major actors from Luxembourg have been in-volved in this business from the start, such as the Luxembourg stock exchange and Clearstream; also institutional actors such as the regulator CssF (Commission de Surveillance du Secteur Financier) which is operating at the forefront by granting licences to Chinese banks or asset managers promoting rmb denominated products; furthermore, the three Chinese banks bOC, ICbC and CCb as they operate the european network out of Luxembourg; and finally, last but certainly not least, the fund and banking as-sociations ALFI and AbbL as their members are the primary actors of this initiative.

Today, Luxembourg is already the most important hub for

cross-border rmb business in the eurozone. Nicolas mackel, new

CeO of Luxembourg for Finance, talks about the government led

initiative to establish Luxembourg as the centre for international renminbi business in the euro

Area.

lFF: What is the objeCtive oF this initiative?

nm: The objective is to position Luxembourg as the main rmb business hub in the eurozone and to create an infrastructure and an environ-ment which are conducive to further developing this position. With the ever increasing role played by China’s economy, positioning Lux-embourg as the center for distribution of rmb denominated funds or allowing banks in Luxembourg to offer rmb deposits among their wealth management products is simply a must. Ultimately, being a center for rmb business could also convince Chinese businesses to set up their european operations in Luxembourg.

lFF: What role does lFF Play in this Context?

nm: Our role is to communicate about Luxembourg’s position as an rmb business center. Luxembourg has been a leading actor in this area from the beginning, but this was not known to the outside world. We will also tie this in with other initiatives and promote it as yet another field of excellence of Luxembourg’s financial center.

lFF: Will the initiative Contribute to the diver-sity oF the luxeMbourg FinanCial Centre?

nm: It will be another pillar in the diversification efforts led by the min-istry of Finances. Together with other initiatives it will help us create new business opportunities for the banks and funds in Luxembourg and thus create jobs which is the ultimate objective of our efforts.

nicolas maCkeL,Ceo,

Luxembourg for Finance

George HeInrICH,Director of the Treasury,

Ministry of Finance Luxembourg

CaPital FloWs vs. trade FloWs

"The growth potential of the internationalisation of the rMb mainly lies in capital flows. Where trade is concerned, suitable financial instruments that ensure transactions have existed for several years. Today, the internationalisation of the rMb above all means China’s participation in interna-tional capital markets and the country’s opening to investment from the rest of the world. In terms of trade finance, Luxembourg is well positioned due to its reputation as an international financial center. The figures show an impressive develop-ment of its rMb business".

dossier rMb | P. 6|7

| rMb-DenoMInATeD InveSTMenT FunDS

Dossier rmb

rmb-denomInaTed InvesTmenT funds

rmb

Luxembourg is already recognised as the leading cross-

border fund distribution hub with a network of 70 countries

throughout the world. It was therefore a natural choice for

some of the biggest fund pro-moters in the investment

fund market to leverage their presence in Luxembourg to

distribute rmb -denominated investment funds for a total

of 214bn rmb.

evolution oF rMb bonds listed on the luxeMbourg stoCk exChange

rMb-denoMinated assets held in luxeMbourg doMiCiled investMent Funds

40

35

30

25

20

15

10

5

0Q3 2012 Q4 2012 Q1 2013 Q2 2013

Number of listed bonds

Issuance amount (rmb bn)

26,0

17,3

39,0

24,0

34,0

18,322

,014

,7

Sources: PwC analysis based on Luxembourg Stock exchange's figures

Sources: bCL, end 2012; exchange rate: 8.081 rMb/eur

money market fundsnon-money

market funds

Debt instruments 0.165 RMB bn 40.567 RMB bn

Equity instruments - 171.807 RMB bn

Other instruments - 1.479 RMB bn

Total 0.165 rmb bn 213.853 rmb bn

dossier rMb

Dossier rmb

rmb and THe Luxembourg sToCk

exCHange

| rMb AnD THe LuxeMbourG SToCk exCHAnGermb

In may 2011, the Luxembourg stock exchange (Luxse) was the

first trading platform to list a commercial Dim sum bond out-side China. As the premier listing place for international bonds, the

Luxse has closely followed the internationalisation of the

renminbi from the beginning and has successfully promoted this

activity to international issuers.

Global Dim sum capital markets operations have increased substantially. robert scharfe, CeO of the Luxembourg stock exchange, has witnessed over the last two years an evolution unseen by other financial centres. "We currently have 40 bonds listed in Luxembourg for a total amount of 24.5bn rMb, which gives us roughly a 25 per cent market share of all issues denomi-nated in rMb. regarding Dim Sum bonds listed on european exchanges, we have a market share of 66 per cent".

The majority of issuers originate from europe, while roughly a third come from the Us and Asia. "our aim is to increase the amount of Asian borrow-ers by increasing our physical presence in that spot in Asia and promoting the activities of the Luxembourg Stock exchange", mr scharfe says. Although Luxembourg is already very much on the map for Asian borrowers in other currencies, they are often unaware of the importance of the rmb business that already exists in Luxembourg. That is why the Luxse is intensifying its contacts with a number of Chinese financial institutions. "We also leverage on the presence of Chinese banks in Luxembourg to serve as a promotion arm for our capital markets activity", scharfe says.

However, the listing of Dim sum bonds is only one aspect. There is also the renminbi qualified foreign institutional investor scheme, rQFII, a tool for foreign investors with presence in Hong Kong to channel their rmb funds in order to invest into the mainland securities market. "eighty per cent of the rQFIIs are likely to be channelled into bonds", mr scharfe explains. "The most important Chinese actor in this regard is the Shenzhen Stock exchange. Similar to the LuxSe, they are also specialised in fixed income listings. The rQFII business might create potential synergies between our exchanges, which we are currently investigating more in detail".

A third aspect that will strengthen the role of the Luxse is being right on Luxembourg’s doorstep. "We want to convince more asset managers of Luxembourg Sicavs offering rMb share-classes to their clients to list them at the LuxSe. This will provide more comfort to investors through more transparency and the advantage of fund tradability".

For mr scharfe, the aim is clear. "We will contribute our part to become the premier rMb centre in the eurozone". earobert sCHarfe,

Ceo,

Luxembourg Stock exchange

dossier rMb | P. 8|9

| CLeArInG AnD SeTTLeMenT oF rMb

Dossier rmb

CLearIng and seTTLemenT of rmb

rmb

since 2010, customers of Clearstream, the Luxembourg-

based international central securities depository (ICsD), can hold renminbi directly and settle

bonds with each other for their trading activity. Clearstream was

the first ICsD to support full rmb settlement. since then,

the company has seen an un-precedented development in its

rmb issuance and volume.

"even before 2010, we had the renminbi as a denomination currency, which meant that issuers could have rMb-denominated instruments, typically investment funds or in our case more fixed income instruments", robert somogyi, senior Vice president business strategy at Clearstream says. being part of the rmb products and Infrastructure working group chaired by the ministry of Finance and dealing with IT systems for rmb clearing and settlement, he is very familiar with the topic. "At the time, the instru-ments had to settle in another currency, typically the uS dollar or euro. In 2010, following the liberalisation of the People’s bank of China allowing so-called offshore renminbi settlements, those same instruments have been able to settle directly in rMb."

As a result, in the first half of 2013 the volume of rmb security settle-ment exceeded the total volume of the previous year. Currently, 40 Dim sum bonds are listed in the Luxembourg stock exchange with a volume of 24,5bn rmb. Clearstream, in turn, through its global activity in 2012 has supported the issuance of more than rmb 84 billions of interna-tional bonds spread over 579 new issues, an increase of more than 71% compared to 2011.

"even before 2010, we had the renminbi as a denomi-nation currency, which meant that issuers could have rMb-denominated instruments, typically investment funds or in our case more fixed income instruments."

the role oF ClearstreaM

Clearstream’s role is to secure the final settlement between intermediaries on Clearstream’s books. "What we are doing in Luxembourg is commercial bank money settlement, which means that we are holding cash accounts against which the securities are settled. We do that in a multi-currency envi-ronment", mr somogyi explains.

In order to ensure an effective way to access foreign currencies, Clear-stream has cash accounts in banks holding those currencies. In the case of rmb, Clearstream has a Cash Correspondent bank in Hong Kong.

both boC and Industrial and Commercial bank of China (ICbC) have been appointed cash clearing banks by the people’s bank of China (pbOC) in Hong Kong and various other markets around the world. Clearstream is planning to maintain the settlement via Hong Kong, but would appreci-ate adding Luxembourg activity. The fact that the three major Chinese banks, boC, ICbC and CCb (China Construction bank) have their european headquarters in Luxembourg, certainly helps Luxembourg’s case.

"We have opened an account with boC in Hong kong and currently settle our rMb flows via Hong kong", mr somogyi explains. "What we would like to see is one or more cash clearing banks appointed in Luxembourg. As they build up deposits via their own network, we could then source the liquidity that our european customers need here in the european time zone, respec-tively through Luxembourg."

Thus, the overall aim is more than that. "What we are targeting in Luxem-bourg is to do the post trade with Clearstream and to build up banking services around that. In order to have adequate liquidity on the market for the investment funds and the bond market, banks have to build up a depo-sit base, retail products, private banking products and merchant banking services here, and also a flow from trade finance", mr somogyi says.

saFety nets

securing the rmb cash flow in times of market uncertainty is a challenge the Lux-embourg market is currently facing. A swap line between eCb (european Central bank) and pbOC is one possible solution; how-ever, the eCb has not yet confirmed this.

between 1999 and 2002, Clearstream has already experienced the introduction of a new currency with the euro. The situation is different this time. The opening up of the renminbi is combined with a renminbi qualified foreign institutional investor scheme (rQFII), which allows investors to buy mainland stocks and bonds using

offshore yuan (CNH) and whose quota recently increased to 270 bn rmb, meaning that clearing banks will have to deal with very large flows in a currency that has both a high demand and restrictions, and thus, also have to secure liquidity.

To ensure the latter, Clearstream is working on a model different from a Central bank swap line. "We aim to provide sufficient li-quidity in commercial bank money: similar to our settlement activity in Clearstream today and our work with boC and others. What we would like to develop is a repo market, working in commercial bank money. This will

yield similar benefits as the swap line and facilitate further growth in the rMb bond and fund markets." mr somogyi is confi-dent that in the long-run and with a market driven increase in volume, the central banks will put a euro-rmb swap line in place.

The further opening up of the renminbi and the business evolving from this will cer-tainly remain a hot topic over the coming years. regarding Clearstream’s international expertise, mr somogyi gets to the heart of the matter: "one of the advantages of being in Luxembourg is that it is so small that you immediately look across the borders." ea

robert somogyI,Senior vice President,

business Strategy Clearstream

sWaP agreeMents betWeen Countries

"A swap agreement between two countries is an assurance for market participation. Its purpose is to ensure liquidity in crisis situations. Swap agreements between two countries can only be agreed between central banks. In the case of the european union, this is the european Central bank. only the eCb has a mandate to negotiate swap agreements with countries outside the eu. A swap agreement agreed by the eCb with the People’s bank of China would be valid for the en-tire eu, so that a level playing for each member state would be ensured".

George HeInrICH,Director of the Treasury,

Ministry of Finance Luxembourg

dossier rMb | P. 10|11

| LoAnS & DePoSITS In rMb

Dossier rmb

Loans & deposITs In rmb

rmb

lFF: you have reCently signed a rMb 100 Million Cross-border loan agreeMent With shen-zhen international. hoW attraCtive are Cross-border loans For Chinese CorPo-rates and What exPertise Can you Provide?

Jd: This is a special arrangement where banks in Hong Kong are allowed to lend directly to a corporate incorporated in Qianhai, an area in shenzhen China and only about one hour’s drive from HK. Qianhai is a special zone designated by the Chinese government as a test ground for more capital account opening with regards to rmb Internationalization. There is also a grand development plan to make Qianhai into an area focusing on a few key industries, such as logistics, information services and financial services.

Typically, the advantage to corporates is the cheaper rmb funding available in the offshore market, compared to onshore (as it is still subject to pbOC regulated rates). The difference can be up to 2-3%. However, it should be noted that this channel (that is, banks in HK lending directly to an onshore borrower) is only applicable to corporates which are incorporated in Qianhai and the loan pro-ceeds are restricted to use for developments / projects in Qianhai. Nevertheless, this arrangement opens up one more channel for offshore rmb to go back onshore.

Josee Lynda denIsCeo, Head of Depository bank,

Standard Chartered bank, Luxembourg branch

standard Chartered just recently opened a depositary bank branch

in Luxembourg. Josee Lynda Denis, the new CeO, analyses the potential of the internationalisa-

tion of the rmb for european corporates.

lFF: What oPPortunities does the inter-nationalisation oF the rMb oFFer to euroPean CorPorates and also FinanCial institutions?

Jd: A recent survey by euroFinance revealed that 73% of global cor-porate treasury professionals are of the view that the renminbi (rmb) will be at least the world’s third most important currency within 10 years.

Finance professionals based in Asia are even more buoyant about the rmb’s importance as a future trading currency with 85% pre-dicting that it will be at least the third most important currency by 2023. Out of the 307 respondents, optimism was highest among corporates who already use at least one offshore rmb product. 79% of those corporates think the rmb will be global number three or better.

The survey, "offshore renminbi: current & planned usage by cor-porate treasurers", was undertaken in association with standard Chartered bank. It was designed to understand the current senti-ment of the global corporate treasury community towards the offshore rmb as a currency, their planned usage and the factors limiting their uptake of the current.

some of the key findings in the latest edition of this survey (15th July 2013), highlight the current sentiment of the global corporate treasury community towards the renminbi (rmb) as a currency, their current and planned usage of the offshore rmb and the factors limiting their uptake of the currency.

key Findings oF the sCb study "oFFshore renMinbi: Current & Planned usage by CorPorate treasurers"

Globally – 73% of treasurers think the rmb will be at least the world’s third most important currency within ten years. For companies located in Asia this figure rises to 85% and existing users of the rmb are also more optimistic about the currency’s future.

The biggest current usage of offshore rmb by corporates is for intercompany trade settlement.

Usage of the offshore rmb for third-party trade settlement has the largest potential growth.

Hong Kong will remain the leading global rmb financial centre.

London is the second most popular rmb centre for companies based outside Asia after Hong Kong and is the leading non-Asian financial centre for offshore rmb.

singapore is the second most popular rmb centre amongst Asian based corporates and the third most popular with the rest of the world.

The biggest factors limiting the current usage of the rmb amongst target corporates today are:

the perception that the regulatory environment is too rigid; a lack of demand from suppliers and customers; the perceived difficulty/complexity that are required for internal process changes.

rMb-denoMinated Private banking ProduCts

In terms of currency diversification, rmb-denominated private banking products are highly attractive to european (U)HNWIs. Clients investing in rmb products are mainly european entrepreneurs doing international business. banque Internationale à Luxembourg (bIL) is one of the Luxembourg banks satisfying the new requirements. patrick Casters, manag-ing Director Wealth management International at bIL, explains: "What is most sought after are traditional products like deposits, funds and Fx operations, but also listed investments, financing and art investments. Discretionary management, for instance, is not that popular. Most of our clients are still in the initial phase of discovering the product range and thus are more comfort-able with traditional products".

The private banking sector certainly has enormous growth potential when it comes to bene fitting from the opening up of the Chinese market. In the future, this will also result in a more sophisticated product range in rmb- denominated private banking products. ea

dossier rMb | P. 12|13

lFF: hoW Will global trade Change With the internationalisation oF the rMb?

Jd: China’s currency is going through a major internationalisation phase and the rules for doing business in China are changing rapidly. The cross-border scheme for rmb trade settlement has evolved since 2009. In June 2012, the scheme was expanded to allow all compa-nies in China with an import and export license to settle their for-eign trade in rmb. previously, only selected businesses were allowed to do this.

China continues to advance the gradual internationalisation of its currency:

All provinces and cities in mainland China can now settle cross-border trade with any country

Hong Kong has become the major hub for offshore rmb and is rapidly developing the FX, debt capital and equity market instruments needed to support the future growth of rmb.

the evolving rMb

rMb as a store of wealth: various stages of rMb internationalisation

reserve CurrenCystore oF Wealthtrade settleMentloCal CirCulation

rMb - the beginning…

July 2009: pilot rmb settlement scheme with Hong Kong, macau and AseAN countries

June 2010: The scheme covers 20 provinces and applicable to all countries

relaxation of rMb cross-border trade scope

August 2011: expansion of cross-border rmb trade settlement from 20 pro-vinces to the whole of mainland China

June 2012: All enterprises with an import-and-export license allowed to settle their foreign trade in rmb

investment options are expanding

October 2011: expan-sion of the Dim sum bond market by allowing domestic mainland corporates to participate

December 2011: Widen-ing the rmb repatriation channel by rmb FDI and rQFII to expand rmb deployment channels back to onshore

rMb as an asset class for institutional and private wealth investors and sovereign wealth investment

What's next? is the rmb paving the way to full convertibility?

lFF: What’s the role oF the sCb luxeMbourg branCh regarding international rMb?

Jd: A relative "newbie" on the Luxembourg financial sector scene, the main objective of s.C.b Luxembourg branch is to handhold our new and existing clients in their Luxembourg UCITs strategies. We want to provide a comprehensive package of Depository bank services and as well as the full suite of Fund services (Fund Administration, Fund Accounting, Transfer Agency, Distribution support).

standard Chartered has an history of 150 years of operation in China. In 2007, standard Chartered bank (China) Limited became one of the first foreign banks to incorporate officially in China, demonstrating its commitment and leading position as a foreign bank in this important market. since this local incorporation, all our branches have able to serve the rmb requirements of clients in and outside of China.

Due to our on-the-ground presence and understanding of the Chinese currency, standard Chartered has been a pioneer in the rmb business and continues to lead as the market develops. The international use of rmb has increased faster than many had expected. Today, the currency is poised to become a major force in global business. As the offshore rmb market continues to develop, standard Chartered can navigate the changes and seize growing opportunities.

As we have the expertise and relationships needed to steer in this evolving landscape, we would like to leverage our rmb services to our Luxembourg clients.

LuxembourgforFinance

hoW do you assess the ChanCe oF suCCess For luxeMbourg to beCoMe the international rMb Centre in the eurozone?

Josee Lynda denIs

I think Luxembourg stands a very good chance to succeed in the rmb space, particularly in the

eurozone as it already has a leading position.

The importance of Luxembourg as an offshore investment center for rmb is a much bigger

deal than the UK: as the home of many UCITs, Luxembourg serves as a central point for market-

ing funds across europe, Asia, the Americas and the middle east – efficiently using one fund

structure. Today, despite all the media attention London has received as being the leading rmb

hub for europe, Luxembourg’s rmb deposits exceed those in both paris and London.

more than half of Chinese investment in europe gets structured through Luxembourg. The

increasing presence of Chinese banks will also give this country an edge.

All of the above provides a compelling story on the evolution of Luxembourg as an rmb Interna-tional center in the eurozone. Going forward, this

can only lead to success as more Chinese and other international players target Luxembourg

as their european center for their rmb business growth strategies. ea