Performing on the biggest stage there is Performing on the ... · Performing on the biggest stage...

Perform

ing on the biggest stage there isEuroclear annual report2007

Euroclear plcExecutive officeBaarermatte6340 BaarSwitzerland

Euroclear plc is incorporated in England and Wales under registered number 1060802, with registered address at 2 Lamb’s Passage, London EC1Y 8BB, United Kingdom

Euroclear SA/NV1 Boulevard du Roi Albert IIB-1210 Brussels, BelgiumTel. +32 (0)2 326 1211RPM Brussels number 0423 747 369www.euroclear.com

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

© 2008 Euroclear SA/NV

Performing onthe biggest stage there is

Euroclear annual report 2007

ContentsHighlights 2Reaching new heights 4Performance highlights 6Financial highlights 8

Strategy 10Chairman’s statement 12Chief Executive’s review 16Group management 22

Delivery 24Achievingourobjectives 26Delivering platform consolidation 27Increasing product efficiency in a globalising industry 32Reducing cost 38Serving clients globally 40

Performingstronglyacrossthegroup 42Euroclear Bank 43Euroclear Belgium 46Euroclear France 48Euroclear Nederland 49Euroclear UK & Ireland 50EMXCo 51

Responsibility 52People 54Corporate responsibility 56Risk management 58Inter-company Transaction Policy audit 64Corporate governance 66Internal control system 75

Finance 78Financial review 80Capital management 86Annual accounts and auditors’ opinion 88Directors’ report CD onlyFinancial statements CD only

Annexes 89Board and Board Committees composition 90Market Advisory Committees (MACs) 96Euroclear group principal offices 97List of Euroclear plc shareholders CD only

Glossary see back cover foldout

2I

The further you push the boundaries, the greater the performanceIn 2007, Euroclear went further than ever before. Further in the sense of delivering

progress. Further in the sense of the service we gave to our clients. And further in

its most literal sense, that of geography. The result is that more institutions than

ever before, in more places than ever before, chose to rely on our uniquely strong

market infrastructure solutions. The success of this approach is confirmed by our

strong figures. But it was not the figures that inspired it: we went further so that

our clients could too. After all, one great performance can inspire a thousand more.

Highlights

euroclearIannual report 2007I�

4I

The Euroclear groupReaching new heights

13 locations

The world’s largest provider of domestic and cross-border settlement and related

services for bond, equity, fund and derivative transactions

euroclearIannual report 2007I5

19.2

561.8

trillion euro securities holdings

trillion euro turnover

6I

• Turnover,orthevalueofsecuritiestrans-actionssettled,was€561.8trillionin2007,anincreaseof24%from€451.7trillionin2006.

• ThevalueofsecuritiesheldforEuroclearclientsattheendof2007was€19.2

trillion,a5%increasefromthe€18.2trillionrecordedatyear-end2006.

• Thenumberofnettedtransactionsset-tledintheEurocleargroupincreasedby9%to155.5millionin2007comparedwith143.1millionin2006.

• ThecombinedaveragedailyvalueofcollateralprovisionoutstandinginEuroclearBankandEuroclearUK&Irelandgrewby11%in2007to€595.0billioncomparedwith€537.9billionattheendof2006.

Performancehighlights


0

100

20

120

40

140

60

80

160

2004 2005 20072006

23.9

26.5

61.53.0

26.9

30.9

65.83.12.5

33.9

32.5

70.2

3.8

40.8

32.3

75.04.6

2.7

2.8

114.9

129.2

143.1

155.5

Euroclear Bank

Euroclear France 2

Euroclear Nederland

Euroclear Belgium

Euroclear UK & Ireland 2

Euroclear Bank


0

100

200

300

400

500

600

2004 2005 20072006

161.4

159.6

246.0

235.9

308.7

229.2

328.1

266.9

321.0

481.9

537.9

595.0

Euroclear Bank

Euroclear France 2

Euroclear Nederland

Euroclear Belgium

0

100

200

300

400

500

600

2004 2005 20072006

132.6

60.2

114.4

154.8

72.7

130.63.3

218.8

84.3

144.83.5

284.5

94.7

176.55.6

0.3

0.5

307.2

361.4

451.7

561.8


0

10

2

12

4

14

6

16

8

18

20

2004 2005 20072006

5.9

3.8

2.7

0.7

7.1

4.4

3.3

0.9

8.1

5.0

3.8

1.0

9.2

5.3

3.5

1.00.3

0.2

13.1

15.7

18.2

19.2

Euroclear Bank

Euroclear France 2

Euroclear Nederland

Euroclear Belgium

Euroclear UK & Ireland 2, 3

1 The data includes intra-group holdings/transactions, as relevant.2 The data for Euroclear UK & Ireland excludes self-collateralising repos; the data for Euroclear France excludes ‘pensions livrées’ with the Central Bank of France.3 Securities in the United Kingdom are held through Euroclear UK & Ireland on the books of the registrars.4 The data for Euroclear UK & Ireland consists of Delivery By Value (DBV) and money-market instrument repo transactions.

Turnover1 (in € trillion) Valueofsecuritiesheld1 (in € trillion)

Numberoftransactionsafternetting1 (in million)

Averagedailycollateralprovisionoutstanding4(in € billion)

8I Highlights

0

5

10

15

20

25

30

19.00

21.4021.40

24.2025.58

2004 2005 200720062005

UK GAAP IFRS

0

500

1000

1500

2000

2500

3000

250

750

1250

1750

2250

2750

3250

3500

20032002 2004 2005 2004 2005 2006 2007

2,457.1

2,132.22,331.3

2,420.12,557.3

2,627.9

2,886.7

3,126.0

UK GAAP IFRS

0

900

300

1200

600

1500

2004 2005 20072006

862.3

963.3

2005

960.3

1,085.4

1,244.0

UK GAAP IFRS

0

300

100

400

200

500

243.4

364.2

308.4

418.2435.3

2004 2005 200720062005

UK GAAP IFRS

Operatingincome (in € million) Operatingprofitbeforetax(in € million)

Dividendpershare (in € per share) Shareholders’equity (in € million)

In2007,theEurocleargroupincreaseditstotalincomeby15%to €1,244million,andhasbeenabletodelivertariffreduc-tionsof€100millionasaconsequenceofstrongoperatingresults.

Atthesametime,wehave:• continuedtoincreaseefficiencythrough

serviceimprovementsforclients;and• madedecisiveprogresswithourplatform

consolidationprogramme.

TherobustperformancehasallowedEurocleartobuildonitssolidcapitalbaseandtoincreasethedividendpaymentby6%to€25.58persharefor2007.

Financialhighlights


2007 2006

Euroclearplcconsolidated

Fortheyearended�1December(in€million)

Operating income 1,244.0 1,085.4

Profit for the year 330.5 318.6

Net earnings per share 86.3 83.2

Dividend per share 25.58 24.20

At�1December

Total assets 16,328.5 14,057.0

Subordinated liabilities 297.9 547.4

Shareholders’ equity 3,126.0 2,886.7

Shareholders’ equity/Total assets 19.1% 20.5%

10I

Strategy

Making history is all about knowing what’s happening nextIn today’s rapidly evolving markets, anticipation is everything. Those who wait to

react are left behind by those who plan ahead. And with the global post-trade

industry at stake, you can’t afford to improvise. We are now over half way

through implementing a ground-breaking programme to make cross-border

domestic. And today, with our clear strategies for emerging markets and specific

instruments, we’re already setting the stage for a strong global presence.

12I

SirNigelWicksChairman

Chairman’s statementYour Board has proposed for 2007 a record dividend of €25.58 per share, representing a

payment of €98 million, compared with €92.7 million in 2006. More than €100 million in

tariff reductions was implemented in 2007, with another €100 million already announced for

2008. Client cost reduction will continue to be a key driver for the Euroclear group. Euroclear

invested €210 million in 2007 to develop services for clients and to help them reduce their

costs and risks. In these ways, Euroclear continues to seek opportunities to share economies

of scale and lower costs for clients, while rewarding shareholders.

euroclearIannual report 2007I1�

MarketdevelopmentsSincelastsummer,boutsofmarketilliquid-ity,volatilityandturmoilhavepresentedmarketparticipantswithenormouschal-lenges.Evenso,astheauthoritieshavenoted,thesecuritiesandpaymentinfra-structureshavecontinuedtheirsteadyperformance.

Forourpart,theEurocleargroup’sInternationalCentralSecuritiesDepository(ICSD),EuroclearBank,andnationalCentralSecuritiesDepositories(CSDs),EuroclearBelgium,EuroclearFrance,EuroclearNederlandandEuroclearUK&Ireland,aswellasEMXCo,havesoughttosupportglobalfinancialstability.EuroclearBankisasingle-purposebank,designedtoensureveryhighsettlementefficiencyatverylowrisk.Itslong-standingpolicyofconservativeriskmanagement,with

about99%ofEuroclearBank’sexposurestoclientssecurelycollateralised,hasservedthemarketwellduringthisdifficultperiod.TheICSDandCSDsofthegrouphavealsocopedwellwithunprecedentedspikesinsettlementactivity.Duringtheuncertaintimesahead,Euroclearwillhaveasitshigh-estprioritythemaintenanceofitsveryhighstandardsofstabilityandcontrol.

DeliveringonourpromisesThereductionincostsandrisksincross-bordersettlementandcustodyinEuropeiscentraltoEuroclear’sstrategy.Accordingly,Euroclearhaspressedaheadduringtheyearwiththedeliveryofourmarketpracticeharmonisationandplatformconsolidationprogramme.Wearemostgratefultothemanymarketparticipantswhocontinuedtodevotetimeandeffortinshapingtheneces-saryconsensusonthenewmarketstandards.

Followingcompletioninearly2007ofthefinalphaseoftheSingleSettlementEngine(SSE),whichisthefoundationforEuroclear’sSinglePlatform,webeganrollingoutthesecondwave–theEuroclearSettlementofEuronext-zoneSecurities(ESES)programme.Whencompletedlaterthisyear,ESESwillprovideasinglesettlementandcustodysolutionforthreeEuronextmarkets:Belgium,FranceandTheNetherlands.Euroclearisthuswellonitswayindeliveringthebasisfora‘domesticsettlementmarketforEurope’,whichweplantocompleteoverthenextthreeyears.Weestimateourprogrammewillgeneratemorethan€300millioninannualsavingsforclients.TheacquisitionofEMXCo,whichtookeffectinearly2007,isprovingtobeasuccessinprovidingvaluablesupporttoEuroclear’sinvestmentfundbusiness.

14I Strategy

Euroclearhasalsorecentlycompleteditsmulti-year,€100millionplanstodeliveralevelofdatacentreresiliencethatisunparalleledamongEuropeaninfrastruc-tureserviceproviders.Threedatacentres,replacingeightthatwereinoperationbyEurocleargroupCSDscollectively,shouldenableclientstofullyresumetechnicaloperationswithEuroclearwithinonehourofalocaldisasterandwithinthreehoursofamajorincidentonthescaleof11September2001.Thistypeofinvestmentdemonstratesthemeritsofuserownershipandgovernance,asweareabletoplaceuserprotectionandbenefitsatthetopofthecompany’spriorities.

TheCodeofConductonClearingandSettlementEuroclearstronglysupportstheEuropeanCommission’sCodeofConductonClearingandSettlement.Webelievethatitiscapableofdeliveringgreatertransparency,competitionanduserchoicemorequicklythananEUDirectivecouldhaveachieved.EurocleargroupCSDsandtheICSDareoperatinginfullcompliancewiththeCode.Moreover,wehaveextendeditsapplicationwithinEurocleartoallassetclasses,i.e.equity,fixed-incomeandfundtransactions.Weencourageothersettlementinfrastruc-tureserviceproviderstoadoptasimilarapproachinordertoacceleratetheprocessofmakingEuropeanpost-tradingmoretransparentandefficient.

EuroclearBankhasmaderequestsforaccesstoseveralstockexchangesandclearinghousesand,inturn,Euroclearentitieshavereceivedrequestsforaccessfromotherpartsoftheinfrastructure.Userdemand

andbusinessneedsaretheprimarycriteriagoverningouranalysisandconclusionstobedrawninmovingahead.

TheproposedTARGET2-SecuritiessystemInJuly2006,theEuropeanCentralBank(ECB)proposedadirect,public-sectorownedandoperatedcommonsettlementplatformforalleuro-zonemarkets.ThedecisionwhethertobuildTARGET2-Securities(T2S),anticipatedforlaunchin2013,isexpectedduringthecourseof2008.GoodworkhasbeendonebytheECBindefininguserrequirementpropos-alsbytheendof2007.Thereare,however,stillsomefundamentalquestionsoutstand-ingon,forexample,thetotalityofcostsandbenefitsforusersfromtheintroduc-tionofT2S,thesystem’sgovernanceandeconomicfeasibility,andtheallocationofrisksandliabilitiesbetweenparticipants.EuroclearisparticipatingactivelyonseveralT2Stechnicalandadvisorycommittees,andisseekinganswerstothesefundamen-talquestions.BeforemakingadecisionwhetherornottojoinT2S,EuroclearwillconsultwithuserstomakeanassessmentwhetherT2Scouldbeexpectedtoprovideamoreefficient,lowercostandlowerrisksettlementenvironment.

AnexpandingmarketplaceGlobalnetcross-borderflowsareestimatedbytheInternationalMonetaryFundtohavebeenaroundaquarterofworldGDPin2006.Justadecadeago,cross-borderflowswerearoundathirdoftheirpresentlevels.Thisglobalisationoffinancialmarketshasgonehandinhandwiththeglobalisationofinstitutions.Ourclientsarechangingthewaytheytradeandinvest,andareglobalis-

ingthemselvesthroughcross-bordermerg-ersandacquisitions.Cross-borderholdingsofprimarilydebtsecuritiesinEuroclearBank,forexample,havemorethandoubledsince2001,thevalueofcross-bordersecuritiestransactionssettledhasmorethantripledandtheuseofcross-bordercollateralhasmorethanquadrupledsince2001.

Inaddition,thegrowthofcreditderiva-tives,structuredproductsandsecuritisationhasbroughtnewpossibilitiestofinancialinstitutionstomanagetheirrisksactively.Bankscandecidewhatriskstheywanttoholdontheirbalancesheets,andthosetheyneedtotransfer.Atthesametime,thismodelismoredependentonmarketliquid-ityandtheabilitytopackageandtransfertheserisks,therebyincreasingdependenceonthesmoothfunctioningofmarketsandtheinfrastructuressupportingthem.

Euroclearmustadaptandrespondtothesetrends.Weare,therefore,seekingtobroadenEuroclear’sportfolioofproductswhilemaintainingourtraditionalfocusontheprovisionofcommoditisedtransaction-processingservices.Wewilldosothroughdialogue,collaborationandcooperationwithourclients.

Aspartofthisapproach,EuroclearBanknowoffersexposuremanagementservicesforderivativestradesandisthefirstset-tlementinfrastructureserviceprovidertooffersettlementandsafekeepingservicesforcarbonemissionrights.Inaddition,EuroclearisformalisingitsalreadystrongrelationshipswithvariousmarketsandinfrastructureserviceprovidersbeyondEurope’sborders.Informationsharing


agreementsandotherformsofcollabora-tionhavebeenestablishedin2007withCSDsinBrazil,Russia,IndiaandChina.Moreover,ourlong-standingcommitmenttoclientsinAsiawillbereinforcedwiththedevelopmentofanoperationscentreinourexistingHongKongoffice.ThiswillimprovethespeedandqualityofresponsetoAsianclientenquiriesaboutoperationalissues.WearealsoopeningarepresentativeofficeinBeijing.

Shareholding-usagerebalancingAtthetimeofEuroclear’smergerwithCRESTCoLimitedin2002,thecompanymadeclearitsintentionthatthesharehold-erbaseofEuroclearshouldcloselyreflecttherelativeusageofthenewgroup’sservicesbyitsshareholders.Itdidnotproveprac-ticableatthetimetodeviseanacceptableschemetomeetthisobjective.TheBoardofEuroclearplcis,however,activelyconsider-ingthismatter.Indoingso,itwould,ofcourse,keepinmindtheneedtosafeguardshareholders’interests.

TheBoardWewelcometotheEuroclearplcandEuroclearSA/NVBoardsMichelBerthezèneofCaissedesDépôtsetConsignations,TimHowellofHSBCHoldingsplc,M.AndrewThreadgoldofUBSAGandRobertC.M.WigleyofMerrillLynchInternational.InOctober2007,theBoardappointedJean-JacquesVerdicktasDeputyChairmanofbothEuroclearplcandEuroclearSA/NV.Hisyearsofexperienceinthebankingindustry,asaformerEuroclearBoardmemberandhiscurrentroleasanindependentDirectorontheEuroclearBankBoardwillbe

mostwelcome.CharlotteBlackofBrewinDolphinSecuritiesLimited,JohnS.GubertofHSBCHoldingsplc,SimonM.HaslamofFidelityInternationalLimited,AlainPapiasseofBNPParibas,JohnM.SchofieldofUBSInvestmentBankandCharlesF.WintersofMerrillLynchhaveresignedfromtheBoard.Iwouldliketothankthemwarmlyfortheircontributions.

Furthermore,IpaytributetoMartineDinne,therecentlyretiredChiefExecutiveOfficerofEuroclearBank,whofornearly40yearswithEuroclearinspiredthosewithwhomsheworkedwithazealforqualityandexcellence.IwouldalsoliketocommendEuroclearmanagementandstafffortheirsuccessindeliveringonsomanyfrontsatthesametime.

Sir Nigel WicksChairman

16I

Chief Executive’s reviewThe year 2007 will obviously be remembered as a very mixed year in financial markets. The

credit crisis that was triggered in the summer by the subprime woes of a number of banks

has created a shock, the full effect of which has not yet been felt. In this turbulent context,

Euroclear has done well in 2007. Group turnover increased by 24% in 2007, an increase only

slightly smaller than was seen in 2006. Obviously, like other firms in the securities business,

we have seen the value of some of the assets under our custody drop in the second part of

the year. But this has affected us less than most in relative terms, because only a moderate

part of our revenues is based on the value of the assets we hold. Considering the financial

impact of the crisis on our clients, we have been especially sensitive to the need to reduce

their costs. In 2007 we made more substantial fee cuts than ever in our history, and we intend

to implement reductions of similar proportions in 2008.


PierreFrancotteCEO of Euroclear SA/NV

KeepingupthepaceAgainstthebackdropofthecreditcrisis,thetradingandpost-tradinginfrastructurelandscapehascontinueditsfar-reachingtransformationin2007.Thelargeststockexchangesarenolongeraspiringtobecomeregionalchampions,butinsteadtopositionthemselvesgloballyandacrossallassetclasses.Traditionalexchangesarefacingnewcompetitors,notonlyfortheirtradingactivities,suchasTurquoiseorChi-X,butalsoforsomeoftheirotherbusinessessuchastradereporting(e.g.Boat).Inthepost-tradingfield,attentionhasshiftedtoclear-ing,notonlybecauseclearingoflistedorOver-The-Counter(OTC)derivativeshasbecomeatopicofmajorstrategicimpor-tancetobothexchangesandusers,butalsobecauserealcompetitionisnowemergingforclearingofcashandderivativesmarkets,promptedinsignificantpartbytheCodeofConduct.Insettlement,competitionhasbeenaccentuatedevenfurther,withthe

distinctionbetweencustodianbanksandCSDsbecomingevenmoretenuous.

Inthiscontext,Euroclearhasimportantlymaintainedthepaceoftransformingthesecuritiesinfrastructuremarketsthispastyear,whichwillhelptostructurallyreducecostsandrisksforourclientsinanevenmorefundamentalway.Wemetthreekeymilestonesintheimplementationofourbusinessmodel:thecompletionofourSSEprogramme,thedeliveryoftheESESplatforminEuroclearFrance,andthecompletionofourambitiousdatacentreprogramme.

Wehavealsodevelopedandintroducedanumberofnewproductsandserviceen-hancementsdesignedtosolveinefficienciesinfixedincome,equities,funds,derivativesandcarbonemissionrightsmarkets.Perhapsmostsignificantly,feedbackfromclientsofallgroupentitiesshowsthatservicequalityhasimprovedappreciablyinthelastyear,

thankstoaspecialfocusinallareasofthegrouponclientserviceandimprovementsinservicingunderourcampaigntobethe‘bestofclass’serviceproviderinourfield.StronggrowthsupportingdeeptariffcutsThegrowthgeneratedthroughout2007hasledtoeconomiesofscalewhichhavebeentranslatedintosignificanttariffreduc-tionsforclients.Inearly2007,EuroclearBankcutitstariffsby€78milliononanannualisedbasis,withafurtherannualfeereductionof€27millioninJune,repre-sentingthelargesttariffreductioninEuroclearBank’shistory.InDecember2007,EuroclearBankannouncedanotherprogrammeofmajorfeereductionsfor2008amountingto €70million,thuscompoundingtheeffectforclientsofthe2007feecuts.EuroclearBankalsopaidclientsover€82millionin2007,followingthemajordecisiontakentoremunerateout-standingcashbalances.EuroclearBankis

18I Strategy

theonlyICSDthatremuneratesbalancesinatransparentanduniformwaytoallclients.

EuroclearUK&Irelandwasalsoabletosignificantlylowercostsforclientsthankstorecordtransactionactivity,thusconfirm-ingitscommitmenttogiveclientsthebenefitsofthelargeeconomiesofscalegeneratedsinceitjoinedtheEurocleargroup.EuroclearUK&Irelandpaid€11millioninrebatestoclientsinearly2007,inproportiontotheiractivityduring2006.Arecord€16.5millionoftariffreductionsannouncedinearly2008aredeliveringa50%reductioninclearing-relatedservicefeesanda10%reductioninsettlementfeesforbothretailandwholesaleclients.

ThelaunchofthecommonESESplat-formfortheclientsofEuroclearBelgium,EuroclearFranceandEuroclearNederlandwillalsotriggerasignificanttariffreduc-tionbythesethreeCSDs,atthesametimeastheirtariffsareharmonised.Theoveralltariffreductionwillamounttoabout€15millionwhenESESisfullylaunchedattheendof2008(about10%reductiononaver-age).Thistariffreductionwillbeincreasedtoaround€50millionwhentheSinglePlatformislaunchedinEuroclearUK&Irelandinacoupleofyears,sorepresentingareductionofabout20%.AthirdwaveoftariffreductionsfortheCSDsofthegroupisanticipatedfor2012,which,takingintoaccountexpectedvolumegrowth,wouldresultinarounda25%feereductionfortheclientsoftheseCSDscomparedtotoday.TheEurocleargroupisalsorollingoutin-ternalprogrammeswiththeaimtoenhanceefficiencyandlowercosts.

BuildingonharmonisationachievementsHarmonisationofmarketpracticesgoeshandinhandwithtechnologyconsolida-tioninseekingtoreducecostsandrisksforclients,bothfordomesticandcross-borderactivity.

Inlinewithourobjectives,theharmonisa-tionofmarketpracticesforassetservicingandsettlementinBelgium,France,Ireland,TheNetherlandsandtheUnitedKingdomwascompletedin2007.Workontheopera-tionalimplementationoftheseagreementsisalreadytakingplace.Afewissuesarebeingreassessedattherequestofthemarketwithaviewtoensuringanoptimaloutcomeforallcountries.

ThisharmonisationisbyfarthesinglemostimportantcontributionsofarofanyCSDorgroupofCSDsinEuropetotakingdownthebarriersidentifiedbytheGiovanninigroupofexperts,which,astheEuropeanCommissionhasstressed,aremateriallyimpairinggrowthinEuropeatthistime.TheseEuroclearachievementsaresignificantatEuropeanlevelbecausethefivedomesticmarketsofthegrouprepresent53%ofequi-tiescapitalisationinEurope.Beyondsettle-mentandassetservicing,theEurocleargroupisnowworkingtoachieveharmonisationinotherareas,namelycollateralmanagement,forwhichaworkinggrouphasalreadybeencreated,aswellasfundsprocessingandissuerservices.Invariably,progresswillbemadeinclosecollaborationwiththemarket.

Wehavealsochosenaharmonisedcentralbankmoneypaymentmodel,theDedicatedLiquidityModel,tobeusedasofthelaunchofSinglePlatformSettlement.Thismodel

willprovideefficiencyforclientswhilecashaccountscontinuetobeoperatedexclusivelybythecentralbanks.Itwillreplacetheintegratedmodelthathadoriginallybeenin-tendedtobeusedinallthedomesticmarketsofthegroup,astheECBhasdeterminedthattheintegratedmodelcouldnotbeextendedinfuturetoanyothermarketinEurope.

OverhalfwaytowardsplatformconsolidationStrongprogresswasagainmadethisyearinthephaseddeliveryoftheplatformcon-solidationprogrammethatis,togetherwithmarketpracticeharmonisation,atthecoreofourbusinessmodel.

TheSSEisnowfullyimplemented,fol-lowingitsintroductioninJanuary2007inEuroclearBank.Performingthecorefunc-tionsofsecuritiessettlement,theSSEisthefoundationontowhichallITsystemswithintheEurocleargrouparebeingconsolidated.ThesuccessfullaunchofESESinEuroclearFranceinNovember2007isamajorsteptowardstheimplementationoftheSinglePlatform.ThesecondphaseofESES,theconnectionofthenewplatformtotheECB’sTARGET2paymentsystem,wasalsodeliveredonscheduleinFebruary2008.ThethirdandlastphaseofESES,theextensionoftheplatformtotheBelgianandDutchCSDs,isscheduledforthelastquarterof2008,allowingforadditionaltestingtoensureasmoothlaunchforthesemarkets.

SignificantprogresswasalsomadetowardsthesubsequentSinglePlatformphasesthroughout2007.ForSinglePlatformCustody,detailedservicedescriptionsarenowbeingpublished.Wehavealsoim-


provedtherolloutplan,allowingmigrationasofthefourthquarterof2009followingasinglelaunchofsoftwareandthereforereducingmigrationriskandmigrationeffortforclients.WorkiswellunderwayforthefinalSinglePlatformSettlementphase,withtheblueprintpublishedattheendof2007.EuroclearthereforeremainsontracktodeliverthekeycomponentsoftheSinglePlatformbytheendofthedecade.

AnimportantpartoftheSinglePlatformisthedevelopmentofaCommonCommuni-cationInterface(CCI)thatclientswillusetoaccessalltheservicesoftheEurocleargroup.Itwillenablethefragmentationbetweenmarkets,acauseofsignificantcost

toourclients,tobereduced,andwillberolledoutinphasesinparallelwiththedeliveryoftheSinglePlatformitself.Thefirstphaseisscheduledtotakeplacein2008whenthelaststageofESESislaunched.

Anintensemarketcampaignhasbeencon-ductedtohelpclientsprepareformigrationtotheSinglePlatform,andinparticulartoadvisethemofthewaysinwhichtheywillbeabletoconnecttoitusingtheCCI.

Anothermajorcomponentofourbusinessmodelwastheambitiousprogrammetoconsolidateourdatacentresforthediffer-ent(I)CSDsofthegroup.Thislargeandhighlycomplexprogrammewascompleted

in2007andisalandmarkachievement.Athirddatacentrelocatedinadifferentcoun-trycantakeoverEuroclear’scriticalbusinessactivityifourtwoprimarydatacentreswereevertobecomeunavailablesimultaneously,forinstanceduetoametropolitandisasterofthesortthatcouldhaveaffectedmarketson11September2001.Noothersettlementserviceprovider,whetherinfrastructureorcommercial,hassuchathreedatacentreconfigurationinEurope,butweexpectthatovertimethiswillbecomethenormex-pectedbyclientsandregulators,asisalreadythecaseintheUnitedStates.

ItwouldclearlybeadvantageousforthemarketsifthebenefitsoftheSingle

The Euroclear group strongly supports the Code

of Conduct for Clearing and Settlement as a

means to deliver greater transparency and access

for users of European trading, clearing and

settlement services.

We have fully complied with the first pillar of the

Code with regard to pricing transparency since it

came into effect in early 2007. Complete tariff in-

formation for each (I)CSD of the group is publicly

available on www.euroclear.com.

The Euroclear (I)CSDs are also all applying the

guidelines from the second pillar of the Code on

access and interoperability, which came into effect

on 1 July 2007. The guidelines provide a basis for

the development of new links between trading

platforms, Central Counterparties (CCPs) and set-

tlement systems. Market participants should now

have the freedom to select their preferred provider

of clearing and settlement services, building on the

provisions that have come into effect under the

Markets in Financial Instruments Directive (MiFID).

The Euroclear group has a well-established track

record, which started years before the Code of

Conduct called for it, of allowing open access

to external providers, including parties that

sometimes seek to compete with Euroclear. As an

illustration, in the last seven years Euroclear UK

& Ireland has given access to eight trading, clear-

ing or settlement parties (LCH.Clearnet Limited,

x-clear, Eurex Clearing AG, European Multilateral

Clearing Facility, London Stock Exchange, Irish

Stock Exchange, SWX Europe and Chi-X) and is

currently following up requests for interoperability

from three parties. The Euroclear (I)CSDs have re-

ceived four requests for access or interoperability

under the second pillar of the Code since August

2007, and have been responding to each of them

in compliance with the Code. Euroclear is itself

seeking access to other post-trading infrastruc-

tures in accordance with the Code, with Euroclear

Bank requesting access to instruction feeds from

stock exchanges and clearing houses in Germany,

Italy and Switzerland.

Euroclear is also complying with the third pillar

of the Code, relating to unbundling and account

segregation, which came into effect on 1 January

2008. Unbundling is the separate offering of

services, which allows any client to purchase a

single service without being compelled to pur-

chase another single service. All Euroclear (I)CSDs

are also in a position to produce financial data in

relation to account segregation to their national

regulators, as called for by the Code.

ImplementingtheCodeofConduct

20I Strategy

Platformandthedatacentreconfigurationcouldbeextended,bothwithinEuropeandbeyond.ThiswouldincreasetheeconomiesofscaleforEuroclearclients,andwouldalsoallowtheinfrastructuresoftheseothermarketsandtheirclientstoshareinthesesavingsandbenefitfromtheinvestmentsal-readymade.Itwouldsubstantiallyimprovethecostprofileforbothdomesticandcross-bordersettlementandcustodyinEuropeandmoreglobally.Euroclearwillthereforeworktocollaboratewithothermarketstobroadenthebenefitsofthebusinessmodel,whetherthroughmergers,platformsharingorincreasedinteroperabilityofsystems.

Newproductsforfast-growingmarketsAsbefitsEuroclear’sroleasaninternationalproviderofmarketinfrastructureservices,

weareseekingtotranslatetheexpertisethatwehavebuiltupintonewsolutionsforevolvingbusinesses.Inthiswayweareabletoprovidemaximumbenefits,includ-ingincreasedefficiencyandlargerpoolsofliquidity,forourclients.

Forinstance,EuroclearBankhasbeendiver-sifyingtosupportthreeexpanding,globalbusinesses.DerivManager,launchedin2007,isanexposuremanagementsolutiontosupporttherapidlygrowingOTCderiva-tivesbusinessbyincreasingautomationandreducingrisk.Wearealsoenteringtheworldwidebusinessofcarbonemissionrightsin2008withthelaunchofClimateSettle.Thisservicelargelyautomatesthepreviouslymostlymanualpost-tradeprocessesforthisemergingbusiness.Inaddition,weintend

tolaunchanothernewserviceforthefast-growingbusinessofbankloans.

BestofclassserviceproviderInrecentyears,Euroclearhasundertakenaseriesofinitiativesinordertosustainanattitudethatclientscomefirst.Theseinitiativeswereintensifiedin2007whenwelaunchedafar-reachingprojecttoensurethatweachieveourgoalofbeingthebestinourclassinclientservice.

Followingthoroughanalysisoffeedbackfromclientsandstaff,wehaveinitiatedimportantmeasuresin2007,startingwithEuroclearBank.Forinstance,oneofthekeyimprovementshasbeenthat,followingamajorreorganisationoftheclientservicefunction,eachclientnowbenefitsfroma

Atrulyglobalprovider

Besides the credit crisis, 2007 will be remembered

in the securities markets as the year when a major

step was made towards the globalisation of the

securities infrastructure, with the completion of

the NYSE-Euronext merger and the announcement

of the merger of NASDAQ with OMX, among

others. Major financial firms have been global for

a number of years, but the securities infrastructure

remained largely domestic or at best regional. In

the future, the global needs of clients will increas-

ingly require a worldwide service offering across

asset classes. As the most global of securities

infrastructures, with clients from over 80 countries

and services covering markets in all regions of the

world, Euroclear is well placed to lead this evolu-

tion in the post-trading area.

Euroclear is further strengthening the close

relationship we have with our clients across the

world, in particular by increasing our presence in

Asia. Euroclear has worked with Asian markets

for 40 years and, drawing on this experience, is

now stepping up its involvement in the region

to help our clients seize the vast opportunities

that the growth of Asia is offering. In the second

quarter of 2008, our representative office in

Hong Kong is being expanded to become a

branch office. The transfer of certain operational

functions to Asia will provide increased process-

ing efficiency for Asian securities and clients, as

service windows are increased and waiting times

dramatically reduced. We are also increasing our

proximity by opening an additional representa-

tive office in Beijing, further demonstrating

our commitment to the region.

Longer term, we plan to develop links and

share our expertise with the securities players

in the region. It was with this objective that

we concluded cooperation agreements with

The Clearing Corporation of India, the China

Government Securities Depository Trust &

Clearing Co, National Securities Depository

Limited (India) and Central Depository Services

(India) Limited in 2007 and early 2008. We

have also concluded a cooperation agreement

with CETIP, the Brazilian CSD, illustrating our

focus on Latin America as another region with

promising prospects.


dedicatedaccountmanageranddirectaccesstospecialistswithindifferentserviceareas.

Improvedresultsfromthe2007ClientSatisfactionSurveydemonstratethatwehavealreadyachievedtangibleprogress,withclientserviceforEuroclearBankratedsignificantlyhigherthaninpastyears.

ConsiderationisnowbeinggiventoasimilarinitiativefortheCSDsofthegroup.Furtherimprovements,includingclosermonitoringofservicelevels,willbeintro-ducedatEuroclearBankduring2008.

ContinuouslyenhancingservicesItisalsoimportantfortheEurocleargrouptorespondquicklytotheevolutionofourclients’needs,asithelpsclientsgrowfasterandfurtherthantheyotherwisecouldiftheinfrastructurewasdraggingbehind.ThishasbeenanareaofspecialfocusacrosstheEurocleargroupin2007.

ThesuccessfullaunchofFundSettlePremieratEuroclearBankin2007hasenabledclientstobenefitfromrecordlevelsofprocessingefficiencyforcross-borderfundtransactionsatlowercost.Inaddition,EuroclearBankintroducedthetrademarkEquityReachfortheserviceitspecificallyoperatesforequities.ThisunderlinesthematurityofEuroclearBank’sequitiesserv-ice,whichwasfurtherimprovedthisyearforEuronext-zonecountries.OneofourambitionsisforthetopservicelevelsthathavebeenachievedinthesecountriestobeexpandednowtoothercountriesinEurope.

TheCSDsofthegrouphavealsoworkedtoenhanceservicesfortheirclients.In

responsetotheneedsofissuersduringthedematerialisationprocess,EuroclearBelgiumhaslaunchedCapitrack,aserviceenablingissuerstoeasilymonitorthedema-terialisationoftheirissuedsecuritiesandtheownershipoftheirsharecapital.

EuroclearUK&IrelandintroducedanenhancedtransactionreportingserviceinNovember2007inordertohelpclientsmeettheirreportingresponsibilitiesfollowingtheintroductionofMiFID.MiFID-relateddatacanalsonowbeincludedinSBItransactionnoticessentbyEuroclearFranceclients.EuroclearNederlandhasrespondedtotheneedsofnewmulti-CCPsin2007byofferingsettle-mentsolutionsfortheseplatforms.

Euroclearentitieshavebeenworkingtogethercloselyindeliveringsolutionsthatbuildontheirspecificstrengths.Forexample,thefundsorderroutingservicedevelopedforEuroclearFrancewillalsobeofferedinBelgiumandTheNetherlandsfollowingthelaunchofESES.EuroclearUK&IrelandandEMXCoareusingtheirsharedexpertiseintheUKfundsmarkettodeliveranintegratedcashsettlementsolu-tionin2008.EuroclearBelgiumisnowpro-vidingitssafekeepingservicestoEuroclearBanktodeliveranoptimalsafekeepingsolu-tionforNewGlobalNotes,inthecontextoftherestructuringthathadbeencalledforbytheECBforsecuritiesusedascollateralformonetarypolicyoperations.

AgroupthatactsresponsiblyWeareproudthatthefeedbackfromthe2007ClientSatisfactionSurveyhasparticularlyrecognisedthehighcalibre

ofourstaff.Thegroupaimstorewardtheachievementsofitspeopleanddevelopthebrightesttalent.Theknowledge,insightandambitionofourpeoplearevitalinachievingourbusinessgoals.Tothisend,weplaceahighvalueondeliveringqualitytobothexternalandinternalclientswhileencouragingopenness,toleranceandrespectthroughoutthecompany.

Wefirmlybelieveinahealthywork-lifebalanceforouremployees,andwantthemtoenjoyworkingwithus.In2007wecreatedagroup-widefunctiondedicatedtowork-lifebalance,recognisingEuroclear’scompetitiveandchallengingenvironment.

Wecontributetosocialsupportinitia-tivestakingplaceoutsideourimmediatemarketcontext,butexpressingourvaluesandconvictions.Forexample,wehavesponsoredamajormultinationalconferenceonmicrofinancethatgatheredmostoftheworldexpertsinthefield.TheEurocleargroupalsogavecloseto€735,000tocharityin2007.Asignificantpartofthissumwasgrantedthroughaprogrammewherebythecompanymatchesindividualdonationstocharitiesmadespontaneouslybyouremployees.ThisisalsopartofwhatEuroclearstandsfor.

Pierre FrancotteCEO of Euroclear SA/NV

22I

Group management (as at 26 March 2008)

11-17-2-18 7-16-23-6 26-25-15-4

Strategy

1. PierreFrancotte Chief Executive Officer, Euroclear SA/NV

2. IgnaceR.Combes Deputy Chief Executive Officer,

Euroclear SA/NV

�. WimClaeys Head of Strategic Programmes Division,

Euroclear SA/NV

4. FredericHannequart Chairman, Euroclear Bank SA/NV

5. Dr.TimMay Chief Executive Officer,

Euroclear UK & Ireland Limited

6. JoëlMérère Vice Chairman, Euroclear France SA

7. AndréRolland Chief Financial Officer, Euroclear SA/NV

ManagementCommitteeofEuroclearSA/NV


24-27-8-12 1-3 21-5-20-919-28-22

8. StéphaneBernard Chief Executive Officer, Euroclear Belgium

9. BernardBoyette Head of ESES Programme and

Legacy Roadmap France Division, Euroclear SA/NV

10. JanColaes Head of Project Delivery Services,

Euroclear SA/NV

11. RichardCrews Deputy Chief Executive Officer,

Euroclear UK & Ireland Limited

12. PierreYvesGoemans Head of Product Management Division,

Euroclear SA/NV

1�. MarkKirby Head of Business Model and Harmonisation

Division, Euroclear SA/NV

14. AmbroseMurphy Head of Legal and Compliance Division,

Euroclear SA/NV

15. YvesPoullet Chief Executive Officer,

Euroclear Bank SA/NV

16. GuySchuermans Chief Executive Officer, Euroclear Nederland

17. MichaelShipton Head of Corporate Technology Division,

Euroclear SA/NV

18. PierreSlechten Chief Executive Officer, Euroclear France SA

19. PeterSneyers Head of Asset Servicing Operations

and Client Services Division, Euroclear Bank SA/NV

20. PeterSucaet Head of Internal Audit Division,

Euroclear SA/NV

21. AnneSwaelus Head of Legacy Roadmap BE/NL/UK

and Development Services Division, Euroclear SA/NV

22. PaulTaylor Head of Financial Division,

Euroclear SA/NV

2�. AnsoThiré Head of Global Capital Markets Division,

Euroclear SA/NV

24. JohnTrundle Head of Risk Management Division,

Euroclear SA/NV

25. ValérieUrbain Head of Human Resources Division,

Euroclear SA/NV

26. LucVantomme Head of Network Management and

Banking Division, Euroclear Bank SA/NV

27. YannicWeber Head of Commercial Division,

Euroclear SA/NV

28. MaxWright Chief Executive Officer,

EMX Company Limited

GroupManagementTeam

24I

Delivery

When everything depends on you, you’ve got to be ready to give everythingEverything we do at Euroclear is driven by a commitment to three things: forcing out market

inefficiencies, reducing risks and lowering costs for clients. Objectives this important demand

real dedication. Our overriding aim is to give our clients a ‘best of class’ service. But there’s

also a whole industry to help move forward. Which is why, around the world, we put every-

thing we have into delivering on our goals.

26I

Achieving our objectives


Theyear2007wasanimportantyearintheimplementationoftheEuroclearbusi-nessmodel,withsignificantprogressmadeacrossallprojectsleadingtoourultimategoalofdeliveringa‘domesticmarketforEurope’forsettlementandassetservicing.Afterthepivotalyearof2006,ourmoveintotheimplementationphasewascon-firmedin2007withthreekeymilestonesreachedontheroadtoourSinglePlatform.

BackgroundForoverfiveyears,Euroclearhasbeenattheforefrontofinitiativestoincreasetheefficiencyofcross-bordertransactionprocessingbyreducingmarketfragmenta-tioninEurope.Theexistinginefficienciesmeanpost-tradetransactionprocessingiscurrentlyseveraltimesmoreexpensiveinEuropethanintheUnitedStates.

TheEurocleargroupisgraduallyimple-mentingabusinessmodelforlow-costcross-bordersettlementandassetservic-ing.Theconceptsofthismodelwerefirstpresentedin2002,andconstitutethemostsignificantinitiativeunderwaytoremovebarrierstocross-borderefficiencyinthepost-tradesegment,asdefinedinthe2001Giovanninigroupreport.

Themainobjectiveofthebusinessmodelistofundamentallyenhancecross-borderefficiencyinsettlementandassetservic-ing,throughthecombinationofmarketpracticeharmonisationandtechnologyplatformconsolidation.AnimportantfactorinthesuccessofthisinitiativeisthatEuroclearhasbeenworkinginclosecollaborationwithclientsandmarketstakeholders.

Wearedeliveringconsolidatedplatformsolutionsthatcanofferallsettlementandcustody-relatedservicesacrosscountriesandassetclasses,usingasetofcommon,harmonisedpracticesandtechnologyinterfaces.

Theundertakingishugeanditsimplemen-tationisphasedoverseveralyears,butitsbenefitswillbeevenmoresubstantial.Fullimplementation,foreseenfortheendofthedecade,willallowcostsavingsofover€300millionperyearfortheindustry.IfthissolutionwereextendedtothewholeofEurope,thebenefitswouldriseto€700-€800millionperyear.

Delivering platform consolidation

Deliveringlow-costcross-borderefficiencyinEurope

The work towards the creation of the Single Platform through which Euroclear group (I)CSDs will offer harmonised services consists primarily of two parallel

and inter-related project streams: the harmonisation of standards and market practices on the one hand and the development of a consolidated IT platform

and client interface on the other.

Harmonisation Platformconsolidation

• Market practices • Consolidated data centres

• Central bank money payment model • SSE

• CSD services • ESES

• Tariffs • CCI

• Single Platform Custody

• Single Platform Settlement

28I Delivery

HarmonisedmarketpracticesCompletingthreeyearsofintenseconsulta-tionandcollaborationwiththemarket,in2007Euroclearsucceededinfinalisingtheprocessofmarketpracticeharmonisa-tiononcoresettlementandassetservicingfunctionalitiesfortheSinglePlatform,asintended.Wewarmlythankallmarketparticipantsandstakeholdersoncemorefortheireffortsandsupportinachievingthismilestone.

In2008,wecontinuetofocusonsomespecificaspects,suchasthedefinitionofasettlementdisciplineregimefortheSinglePlatform.Furthermore,wecontinuetocommunicateverycloselywiththemarketinkeyareassuchassettlementandcustodytokeepabreastofharmonisationinitiativesatEuropeanlevelandensureconsistencywithwhatwehaveachievedsofar.Forthisreason,theCross-borderMarketAdvisoryCommitteeagreedtoreorganisetheCross-borderHarmonisationWorkingGroupsattheendof2007.

Inaddition,theEurocleargroupislook-ingintoevenmoreservicesthatcanbeharmonisedatdomesticlevel,withthesupportofclientsandmarketstakeholders.ThecreationoftheCollateralManagementWorkingGroupin2007wasthestartofanintenseperiodofcollaborationwiththemarkettoachieveapatternforharmonisedcollateralmanagement.Issuerservicesaresimilarlyonthelistforharmonisation.

HarmonisedcentralbankmoneypaymentmodelEurocleartookthedecisionin2007todevelopanewpaymentmodeltobeusedasoftheimplementationoftheSinglePlatform.ThisfolloweddiscussionswiththeEurosystem,whichindicatedthattheintegratedpaymentmodelusedforESEScouldnotbeextendedtoCSDsotherthanthoseusingitalready,andthatthemodelcouldnolongerbeusedifTARGET2-Securitiesweretogolive.TheDedicatedLiquidityModelachievesouraimofmaintainingaveryhighlevelofefficiencyforclients,whilecashaccountswillcon-tinuetobeoperatedbythecentralbanksthemselves.

HarmonisedtariffsAsanintegralpartofitsbusinessmodel,Euroclearaimstoharmonisetariffsacrosscommonlyofferedservices.In2007,EuroclearpublisheditsharmonisedtariffsforESESCSDs.ThesewillapplytoclientsofEuroclearBelgium,EuroclearFranceandEuroclearNederlandasofthemigra-tionofEuroclearBelgiumandEuroclearNederlandtotheESESplatform.Thenewtariffsreflecttheaimofdeliveringharmo-nisationandconsolidationandwillleadtocostreductionsof10%,orapproximatelyE15millionperyearafterthelaunchofESES,whichisexpectedtoincreaseto25%by2012.EuroclearUK&IrelandwilladoptharmonisedtariffsasoftheimplementationoftheSinglePlatform.


The group will seek to maximise the benefits of its achievements and aims to extend the use of its consolidated platform solutions beyond the initial five countries.

WhatdoesEuroclear’sharmonisationandconsolidationprocessdeliver?

The market practice harmonisation and platform

consolidation being delivered by Euroclear opens

the door to a true ‘domestic market for Europe’.

Based on the harmonisation agreements reached

for settlement and asset servicing, clients of the

CSDs of any of five European countries (Belgium,

France, Ireland, The Netherlands and the United

Kingdom) will soon be able to hold and settle

transactions in securities from another of these

countries in exactly the same way as those in their

own. In this way, Euroclear will effectively abolish

the concept of ‘cross-border’, with domestic-like

processing efficiency and cost levels as benefits

for clients. Harmonisation was designed with a

view to be extendable to other European coun-

tries, offering the prospect of additional savings

for clients in years to come.

A key factor is that Euroclear is providing

harmonisation beyond settlement to also include

comprehensive custody services, reporting and

communication, because we are convinced that

real and substantial efficiency and cost benefits

can be delivered to market participants only

by harmonising end-to-end processes.

Our harmonisation and platform consolidation

work therefore represents a major contribution

to the removal of several of the 15 Giovannini

barriers, as shown below.

Giovanninibarrier

Barrier1Diversity of IT platform interfaces

Barrier�Different rules governing corporate actions

Barrier6Differences in standard settlement periods

Barrier7Different operating hours and settlement deadlines

Eurocleardeliverable

Euroclear is delivering single IT platforms and client interfaces:

• ESES in France: launched November 2007• ESES in Belgium and The Netherlands: November 2008• Single Platform in Belgium, France, Ireland, The Netherlands, the United Kingdom and Euroclear Bank: from Q4 2009 onwards

Harmonisation agreements reached across corporate actions and custody practices for both ESES and the Single Platform (five countries)

Harmonisation agreements achieved for standardised settlement periods, operating hours and settlement deadlines for both ESES and the Single Platform (five countries)

Harmonisation agreements achieved for standardised operating hours and settlement deadlines for both ESES and the Single Platform (five countries)

�0I Delivery

Threekeymilestonessuccessfullyachievedin2007WiththesuccessfullaunchoftheSSEinJanuary2007inEuroclearBank,theSSEisnowfullyimplemented.TheSSEperformsthecorefunctionsofsecuritiessettlement,includingthepositioningandbookingofcashandsecuritiestransfers.Itisthefoun-dationontowhichallITsystemswithintheEurocleargrouparebeingconsolidated.

TheintroductionofESESinFrancewasamajorstepforwardbytheprivatesectorinremovingthebarriersidentifiedbytheGiovanniniGroup.Bytheendof2008,theCSDsoftheEuronext-zonecountriesBelgium,FranceandTheNetherlandswillhaveasingleplatformandfunctionasaunifieddomesticmarketforsettlementandassetservicing.ESESwillsupportNYSEEuronext’sSingleOrderBookfortransac-tionsemanatingfromtheAmsterdam,BrusselsandParismarkets.

Asaresultofthedeliveryofthefinalcomponentsinourresilienceandrecoverystrategy,wenowhavethreegroupdatacentresinplacetosupportourfuturecon-solidatedplatforms,whicharesufficientlydistancedtosustainoperationsacrossallgroup(I)CSDsintheeventofaregional-scaledisaster.

TowardstheSinglePlatformESESisanintermediarysteptowardstheSinglePlatform.WiththeSinglePlatform,marketparticipantswillreapallefficiencybenefitsdeliveredbyourharmonisationandconsolidationworkinsettlementandassetservicingcombined.ItwillofferstandardisedpracticesandaccesstoIreland,theUnitedKingdomandtheinternationaldimensionofEuroclearBankontopoftheEuronext-zonecountries.

TheSinglePlatformwillbedeliveredintwophasesfollowingESES,withthe

custodyphasescheduledforgradualimple-mentationasofQ42009,andthesettle-mentphaseattheendofthedecade.Theorderofthephaseshasbeendeterminedtoensureanaccelerateddeliveryofback-officesavingsforclients,asthelevelofstandardi-sationinthecustodyareaisgenerallylowerthaninthesettlementarea.

In2007,werolledoutanintensemarketawarenesscampaignonSinglePlatformCustodyandtheCCI,thesinglecom-municationinterfacethatclientswillusetoaccesstheSinglePlatform.WehavealsoreviewedandimprovedtherolloutplanforSinglePlatformCustody,defininganopti-malimplementationwithasinglelaunchofsoftware.

In2008,wewillmoveintothedesignphaseofSinglePlatformSettlement.Wewillalsocompletemarketconsultationonforeignsecuritiesandonamarketdisciplineregime.

Platformconsolidation

January 2007

SSE fully launched

following its introduction

in Euroclear Bank

December 2007

Completion of data centre

consolidation with setup of

third, remote data centre

November 2007

Launch of ESES in France

November 2008

Launch of ESES in

Belgium and The

Netherlands

From Q4 2009

Launch of Single

Platform Custody

Late 2010/early 2011

Launch of Single

Platform Settlement

2007 2008 2009 2010

euroclearIannual report 2007I�1

In the course of 2008, the ECB will take a decision

on whether to go ahead with its plans to build

TARGET2-Securities (T2S). T2S is intended to be a

centralised technical platform to provide securities

settlement in euro central bank money. It is sched-

uled to be implemented around 2013.

The Euroclear group, which provides settlement

services in sterling and in commercial bank

money, as well as in euro and central bank money,

will take a decision on whether to participate

in T2S after consultation with Euroclear’s users,

when information has become available on some

important outstanding questions.

The main questions relate to the project’s market

impact and its economic feasibility, together

with legal and governance questions which are

being discussed with the ECB and the market. In

particular, the design of T2S as a settlement-only

platform creates a unique split between settle-

ment and custody services including, inter alia,

corporate actions, collateral management and

securities financing, the cost and risk implications

of which need to be fully understood by the mar-

ket. The most fundamental question is whether

T2S, as an additional platform, can effectively

deliver upon its vision of efficiency and cost

reduction across the European securities markets.

Euroclear continues to provide constructive

feedback to the ECB and has participated in

the Advisory Group and a number of Techni-

cal Groups established by the ECB during this

project. Clarification of the open issues will

assist CSDs, including Euroclear, and market

participants in making a judgment on whether to

participate in T2S.

Regardless of any T2S decision, Euroclear will con-

tinue to implement its Single Platform, bringing all

custody, settlement (and gradually other services)

provided by group (I)CSDs onto one platform.

Our platform goes much beyond settlement and

is scheduled to be completed years before T2S

would go live. Also, in our experience, far-reach-

ing harmonisation of market practices is the key

to success in delivering substantial efficiency

and cost gains from consolidation. Our clients

will therefore realise significant benefit from the

Euroclear market practice harmonisation work

delivered across services, which effectively creates

a ‘domestic market for Europe’ in these countries.

TARGET2-Securities:awaitingmoreclarity

�2I Delivery

Ontopofourconsolidationandharmoni-sationprogrammes,specificstrategiesperassetclasswillhelpachieveevengreaterefficiency.Fundamentalchangeisusuallythefruitofseveralsteps,whichmaytaketime.Thatiswhyweensurethatanystepstakenachievesteadyandtangibleimprove-ment,andatthesametimeleaveroomforflexibilityandaccelerateddeliveryshouldthesituationsorequire.

Theservicesthatwehavedevelopedin2007andearly2008forderivativesandemissionrightsdemonstratetherelevanceofusingexpertisegainedinexistingassetclassesinEurocleartoprovideefficientsolutionsforneweronesinaveryshorttimeframe.

EquitiesTheobjectivetofundamentallyenhanceefficiencyinequitiessettlementandassetservicinghasbeenanimportantpartoftheEuroclearbusinessmodelfromitsinceptionin2002.

Inlinewithourstrategy,thefocusofservicedevelopmentsisatbothCSDandICSDlevel,withtheaimofofferingchoiceandefficiencyinresponsetodistinctclientneeds.

WiththeintroductionofESES,thefirstcross-marketconsolidatedsettlementandcustodysolutionisbeingputinplace.Onitscompletionin2008,threeoftheEuronext-zonemarketswilloperateasone.Seealsopage47.

EuroclearBanklaunchedthetrademark‘EquityReach’fortheserviceitspecificallydesignedforequities.Thisdecisionun-

derlinesthematurityoftheservice,whichhasbeendevelopedoverseveralyears,andnowprovidescross-borderaccesstoover25equitiesmarkets.

EquityReachachievedevenhigherservicelevelsintheEuronextzone.InparallelwiththeobviousmarketdemandforESES,EquityReachhasalsoattractedsignificantnewbusinessinthesecountries,frominvest-mentbanksandnumerousEuropeancom-mercialbanks,demonstratingthatEuroclearissucceedinginitsobjectivetoofferrealchoicetoclientsinthisimportantsegment.

In2008,theprogressmadeintheEuronextzonewillbeexpandedtootherEquityReachlinks.AspartofthisandinlinewiththeinteroperabilityguidelinesintheCodeofConduct,EuroclearBankhasofficiallyrequestedaccesstoinstructionfeedsfromstockexchangesandclearinghousesinGermany,ItalyandSwitzerland.

InternationaldebtsecuritiesTheeurobondbusinessrepresentsthelargestpoolofliquidityinEurope,withthetotalvalueofsecuritiesissuedthroughandprimarilydepositedwiththeICSDsreachingE8.2trillioninDecember2007,andgrowingmorethan14%peryear.EuroclearBankhashistoricallyplayedaleadingroleinachievingveryhighlevelsofsettlementefficiency.Meanwhile,businessgrowth,combinedwithgrowingdiversityandcomplexityofinstruments,hasledtoprocessingchallengesinkeyareassuchasissuanceandassetservicing.

EuroclearBankandClearstreamBankingLuxembourg,togetherwiththemarket,

Increasing product efficiency in a globalising industry

euroclearIannual report 2007I��

havelaunchedaprogrammetosetprocess-ingstandardsfortheservicingofinterna-tionaldebtsecuritiesprimarilydepositedintheICSDs.TheinitiativeissteeredbytheInternationalSecuritiesMarketAdvisoryGroup(ISMAG),aseniormarketcommit-teeformedforthispurposeinJune2007.Theprogrammewillspanthreeyears,andwillfocusonsecuritiesissuanceandassetservicingprocesses,suchascorpo-rateactionsandincomeinformationandinstructionprocessing.Thisisanambitiousinitiative,whichfurthershowsthemarket’sdeterminationtotackletheGiovanninibar-riersdecisivelyintheshortterm.

Certainshort-termdeliverablesintheareasofinformationprovisionfornewissuesandcorporateactionsshouldbereachedinmid-2008.Itisanticipatedthatamarketprotocoldetailingtheagreedstandardswillbefinalisedin2010,includingfullSTPintheend-to-endprocessesfromissuertoinvestor.Thechangeprogrammeissettoachieveahighlevelofserviceandefficiencytowardsinvestorsandissuers,combinedwithareductioninriskandoperationalcostsforallplayersinvolved,andwillfuelcontinuingcompetitivenessandhighlevelsofinnovation.

DomesticdebtsecuritiesEuroclearisfocusingonthecontinueddevelopmentofitsserviceofferingfordomesticdebtsecurities.

EuroclearBankhasdevelopedasignificantpositionindomesticdebtsecuritiesovermanyyears,andoffersclientsasingleaccesstoover30countries,therebyeffi-cientlycombiningcross-bordersettlement,

comprehensiveassetservicing,collateralmanagementandlendingservices.In2007,wehavefurtherimprovedtheturnaroundandinteroperabilitywithBelgium,France,GermanyandTheNetherlandsbyextend-ingreimbursementtimingsinthelendinginfrastructure.EuroclearBankalsoexpand-editsreachasJapaneseGovernmentBonds(JGBs)becameeligibleandanewlinkwithSloveniawasadded.

Complementingthegroupofferinginpri-marymarkets,wesuccessfullyextendedourprimarydealerservicestoincludeBelgium,inadditiontoAustria,France,Ireland,TheNetherlandsandPortugal.ClientsparticularlyvaluetheefficiencyandlocalmarketproximityinthecountriesinwhichEuroclearoperatesCSDs.

ThegroupactivelyseekstomaximiseSTPefficiencyfromtradingthroughtosettlement,andforthisreasontakesdirectfeedsfromCCPsandtradingplatforms.Inthiscontext,Euroclearisfullypreparedtooffersettlementservicestonewentrantsinthemarket,bothatCCPandtradingplatformlevel.

The International Securities Market

Advisory Group will bring greater

operational efficiency to the interna-

tional securities business by working

to reduce the back-office costs and

risks that are growing as volumes

and complexity increase.

JohnGubertChairmanInternational Securities Market Advisory Group

�4I Delivery

DerivativesTheworldwideOTCderivativesbusinessisgrowingatanexceptionallyrapidpace.Accordingtothe2007OperationsBench-markingSurveyfromtheInternationalSwapsandDerivativesAssociation,month-lyOTCderivativetransactionvolumesnearlydoubledinthespaceofayeartoover17,000permonth.Handinhandwiththisgrowth,thelevelofdiscrepancyinexposureamongdealershasincreasedtohundredsofmillionsofeuros.

EuroclearBankhasrespondedtotheneedforanexposuremanagementsolutionbyintroducinganewserviceinQ42007.DerivManagerisanimportantsteptowardsprovidinggreatertransparency,flexibilityandautomationinmanagingbilateralexpo-sure.Itprovidestradematchinganddailyportfolioreconciliationsbetweencounter-parties,helpingclientstosubstantiallyreducecounterpartyrisk.Theservicealsoallowsclientstocollateralisetheirderiva-tivesexposuresmoreeffectively.

DerivManagercomplementsthesolutionsalreadyputinplacebyTheDepositoryTrust&ClearingCorporation(DTCC),amongothers.Majormarketparticipants,mainlyinvestmentbanksandbrokers,subscribedfromtheoutsettotheservice,whichwasdevelopedincloseco-operationwithkeymarketparticipants.Itisagoodexampleofhowthefinanceindustrycanworktogethertodevelopefficientmarketinfrastructure.

Theservicefitsnaturallywithinourexist-ingroleasaproviderofautomationandstandardisationinderivativespost-trade

services.Aheadofthislaunch,EuroclearBankalreadyhandled€500billionofsecuritiesderivativesbusiness.

Developmentworkwillcontinue,firstbyextendingtheofferingtoprovideinvestmentbankswithatoolforefficientexposuremanagementwiththeirunderlyingclients.

FundsInvestmentfundsinEuropehavebeengrowingatacompoundannualrateof15%since2003,withtotalEuropeanfundassetscrossingtheE8trillionthresholdin2007.Themajorityofthisgrowthcontinuestobeconcentratedincross-borderfunds.Domesticandcross-borderfundtransac-tionprocesseshaveonthewholedevelopedwithmajorstructuralinefficiencies,andEuroclearhasbeentacklingtheseinefficien-ciesheadon.

In2007,thesuccessfullaunchofFundSettlePremier,ahigherqualityservicelevel,hasenabledclientstobenefitfromthehighestlevelsofefficiencyintheprocessingofcross-borderfundsatlowercost.In2008,amongotherinitiatives,wewillconsiderhowtoextendourfundservicestothehedgefundmarket,tohelptackleitshugeoperationalinefficiencies.

WelaunchedthesecondphaseofourorderroutingfunctionalityinEuroclearFranceinApril2007.Asaresult,theorderroutingandsettlementprocessforFrenchfundsisnowfullyautomated.Clienttake-upsofarhasbeenpromising,withasteadyincreaseindomesticfundsmovingtothisnewmarketsolution.

DerivManager is an important move

towards greater transparency, flexibility

and automation in managing bilateral

exposures. It is a result of close col-

laboration between the Collateral

Framework Group and Euroclear Bank,

and is set to meet the OTC derivatives

market’s needs.

MarkRowlandsCo-Chair of the Collateral Framework Group


Funds:threephasestowardsanefficientinfrastructure

Developmentofharmoniseddomesticofferingsacrossgroupcountries

EMXCo and Euroclear UK & Ireland will

deliver an integrated cash settlement solution

for UK funds in 2008. The second phase, a

cash and securities settlement solution, is

planned for 2009.

A harmonised solution for Euronext-zone

countries, extending the Euroclear France

solution to Belgium and The Netherlands, will

be implemented shortly after the launch of

ESES in these countries.

Linkingofexistingsolutionstowardsasingleaccesspoint

Domestic and cross-border services will be con-

nected to extend coverage and gradually move

towards a single access point:

• French distributors using Euroclear France

for funds order routing are already able to

connect to FundSettle for cross-border funds

• In 2008, FundSettle will connect to the

Euroclear France order routing service, and

to EMXCo for UK funds

• In 2009, Euroclear intends to further lever-

age the group capabilities to service funds,

for example by extending EMXCo’s order

routing service to cross-border funds via a

connection to FundSettle.

IntegrationofallfundsolutionsintotheSinglePlatformusingtheCCI

The launch of Euroclear’s Single Platform will

allow funds to be integrated with other asset

classes while maintaining specific functionality

related to funds services.

Euroclear will offer open architecture for

messaging, accommodating both major

standards (ISO and FIX).

�6I Delivery

EmissionrightsEuroclearBankisenteringintothefast-growing,worldwidebusinessofcarbonemissionrightstrading,withthelaunchofasettlementandsafekeepingservice,ClimateSettle,in2008.Carbonemissionrightstradingvolumeshitrecordhighsin2007,withanestimated€25billiontradedworldwide(comparedto€9billionin2005).Increasedinterestfromretailinves-torsisestimatedtotipthebusinesstowards€40billionby2012.

Beforethenewservice,processeswereviewedasinsufficientandlackinginauto-mationandthereforecostly,time-consum-inganderror-prone.ThenewserviceoncemoreunderlinesEuroclear’scommitmenttoprovidemarketinfrastructurefacilitiestoincreaseefficiencyacrossconstantlyevolvingbusinesses,andtobeasingleentrypointforourtraditionalclientsacrossthefullrangeofproductsforwhichtheyneedinfrastructureservices.

Severaltypesofemissionrightshavebeendeveloped,withtradingtakingplaceonmarketplaces,electronicplatformsandOTC.AtEUlevel,nationallyallocatedquotasforemissionsaretradedasEuropeanAllowances.In2008,amarketforaUN-approvedtypeofcreditforemission-friend-lyprojectsknownasCertifiedEmissionReductionrights(CERs)willopen.LikeEuroclear’sexistingsettlementservicesforfixedincomeandequities,ClimateSettleisanopensolution,whichcanprovidesettlementforalltrades,irrespectiveoftradingvenue.Forexample,itwillbeabletosettletradesstruckontheClimateSpotExchange,anelectronictradingplatform

accountingfor82%ofallexchangetradesinemissionsfutures.

WithClimateSettle,matchingandsettle-mentoftransactionstakesplaceonthebooksofEuroclearBankonaDVPbasis,withclientssendinginstructionsforbothexchange-tradedandOTCtransactions.Euroclearisdeliveringtheflexibleandstandardisedsolutionthatemissionstradingrequires.

Euroclear is a natural choice for set-

tlement and post-trade services in the

emissions market because of its history

of success in delivering such services to

a wide range of asset classes.

PhilBrownChief Executive Officer Climate Spot Exchange


Collateralmanagement

In parallel with the continued trend of collater-

alisation, Euroclear has further strengthened its

focus on the development of its collateral man-

agement services, both at CSD and ICSD level.

We are in the process of designing a harmonised

collateral management offering for all CSDs,

allowing clients to benefit from the significant in-

crease in pooling capabilities that will result from

the Single Platform. This service harmonisation

is in line with that being delivered for settlement

and custody services.

In order to assist Euroclear in this process, a cross-

border Collateral Management Working Group

has been set up. This group of expert practitioners

is providing advice on functionality and market

practices, and guiding the design of a service

meeting the needs of the market.

In other local developments, Euroclear UK &

Ireland made the changes in 2007 to enable the

direct input of Delivery By Value (DBV) instructions

and associated repo payments, in order to support

LCH.Clearnet’s RepoClear service. In France,

Euroclear France extended the pool of eligible

collateral and is improving STP for foreign debt.

Following the successful launch of a facility for

clients to re-use collateral in 2007, and amid dif-

ficult market conditions in the wake of the credit

crisis, Euroclear Bank has reinforced its position in

collateral management services.

Euroclear Bank will support LCH.Clearnet’s new

EuroGC RepoClear service when it is launched in

Q2 2008. EuroGC is a general collateral clearing

service for euro-denominated government bond

baskets, for which Euroclear Bank will use its

auto-allocation tool AutoSelect® to offer settle-

ment services. Euroclear Bank will also further

enhance the allocation and pooling capabilities

for collateralisation with TARGET2 central banks.

�8I Delivery

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Reducing cost

Euroclearhasaclearmissionto:• continuouslyenhanceitsservicesand

provideincreasinglyefficientsolutionswithaviewtolowercostsforthemarket;and

• sharethebenefitsofincreasedefficiencyandeconomiesofscalewithitsclients.

Euroclearhasmadethecommitmenttodrivedowncostsforclients.Thecostreductionsdeliveredin2007,andthosealreadydeliveredorplannedfor2008,demonstrateoncemorethatwedeliveronourcommitments.

EuroclearBanktariffreductionsImportantbusinessgrowthgeneratedthroughout2007hasrealisedsignificanteconomiesofscaleand,asaresult,EuroclearBankwasabletoimplementitslargestpack-ageoftariffcutsever,amountingtoover€100milliononanannualisedbasis.Thefullpackagewasdeliveredthroughperma-nentfeereductionsratherthanrebates,thusgivingclientsthebenefitofcompoundedfeereductionsoverseveralyears.

Themajordecisiontakenlastyeartoremu-nerateoutstandingcashbalancesresulted

inover€82millionbeingpaidtoclientsin2007.EuroclearBankistheonlyICSDthatremuneratesbalancesinatransparentanduniformwaytoallclients.

Afurther€70millionfeereductionhasalreadybeenannouncedfor2008,enablingclientstobenefitfromlowertariffsfordo-mesticbondandeurobondsafekeeping,settlementandsafekeepinginEuronext-zoneequitiesandtripartycollateralmanagement.Forthelatterservice,thisconstitutesanother15%reduction,ontopofthe25%reductiondeliveredin2007.

Euroclear maintains strategically competitive

pricing, and takes subsequent initiatives to deliver

further efficiency gains. This results in both a

decrease in pricing and cost reductions for clients

in their back-office operations, which in turn

allows for additional business growth for us and

our clients. Efficient solutions and competitive

pricing lead to further economies of scale.

Thedualbenefitsofefficiencygains

Efficiencygains/enhancedservicing

attracting higher volumes economies of scale

loweringinternalcostforclients

benefitspassedontoclientsincostreduction


WiththelaunchofESESinBelgiumandTheNetherlands,thefamilyconcept,whichiscurrentlyappliedtoholdingsacrossEuroclearBankandEuroclearFrance,willbeextendedtoincludeEuroclearBelgiumandEuroclearNederland.Itsextensionwillresultinsafekeepingfeereductions,passingonthebenefitsofcostsynergiestoourclients.

CSDtariffreductionsEuroclearUK&Irelandpaid€11mil-lioninrebatestoclientsinearly2007,inproportiontotheiractivityduring2006.

Furthertariffreductionsof€16.5millionin2008aredeliveringa50%reductioninclearing-relatedservicefeesanda10%reductioninsettlementfeesforbothretailandwholesaleclients.

During2007,EuroclearpublisheditstariffforharmonisedCSDservicesontheESESplatform.ThenewharmonisedtariffswillapplytoclientsofEuroclearBelgium,EuroclearFranceandEuroclearNederlandasofthemigrationofEuroclearBelgiumandEuroclearNederlandtotheESESplatform.EuroclearUK&Irelandclients

willseetariffreductionswhentheSinglePlatformislaunched.

Tariffswillbecutbyabout10%asofthelaunchofESES,around20%whentheSinglePlatformisextendedtoEuroclearUK&Irelandin2010,andanexpected25%by2012.

Thenewtariffrepresentsamajormilestoneinmakingharmonisationareality.IthasbeenstructuredtoensurefairaccesstoESES,regardlessofthescaleofholdingsandtransactionvolumes.

Overviewofmajorcostreductionsandclientbenefits

Level

ICSD

CSDs

2006

• €45 million in rebates paid

early 2006, in proportion to clients’

activity in 2005

• €40 million in annualised

fee reductions

• €11 million as a result of our deci-

sion to start paying credit interest

on outstanding cash balances

• Euroclear UK & Ireland: €15 million

in annualised tariff reductions

• Euroclear France: €1 million per

year for users of SBI post-trade

confirmation service

2007


fee reductions

• €45 million in rebates paid early

2007, in proportion to clients’

activity

• €82 million paid as remuneration

of outstanding cash balances

• Euroclear UK & Ireland:

€11 million in rebates paid early

2007, in proportion to clients’

activity in 2006

20081

• €70 million in annualised fee

reductions already announced

• Euroclear UK & Ireland:

€16.5 million in fee reductions


fee reductions resulting from

the implementation of ESES

1 Amount confirmed to date

40I Delivery

Serving clients globally

All Euroclear group (I)CSDs made significant

progress with their Client Satisfaction Survey

results for 2007, with a group-wide satisfaction

score of 74.1%, compared to 70.9% in 2006.

The results provide confirmation that the initia-

tives made in recent years to reinforce client

focus, such as the drive to be ‘best of class’ in

client service, are bearing fruit. Clients welcomed

our communication with the market, for example

through the Implementation Committees that we

have set up in the ESES countries. More generally,

our strength in our core services and the excel-

lence of our people were recognised. Our employ-

ees in Europe and in our local offices around the

world are perceived to be knowledgeable and to

provide a quality service.

In 2008 we are focusing on those areas where

clients still have some concerns. We are increasing

our efforts to reduce the turnaround times for

queries in certain areas, as part of further imple-

mentation of our ‘best of class’ initiatives.

We are also reviewing our communication

streams to clients in order to avoid information

overload, and a new website with enhanced

navigation and search functions will make it

easier for people to find the information they

are looking for.

TheEurocleargroupservesclientsfromMelbournetoHelsinkiandfromLosAngelestoTokyo.

Ourmottoisthatclientsalwayscomefirst.Wewanttomeetourclients’needsastheyevolveamidchangingmarketconditionsandincreasingglobalisation.In2007,webuiltonourglobalpresence,andwereinforcedourclientfocusinitiativeswiththeclearambitiontoberecognisedas‘bestofclass’inourindustry.

Beingthe‘bestofclass’serviceproviderEuroclearisdeterminedtostandoutfromitscompetitorsacrossalltheareasthatcon-tributetoclientsatisfaction.Wearerecog-nisedinthemarketashavingperhapsthemostknowledgeableandreliablestaffandwewanttoleveragethistogiveourclientsthebestserviceavailable.

Thereisaneedformoredirectaccesstospecialistassistanceasaresultofthegrowingdiversityandcomplexityofinstrumentsandoptions.Todeterminehowbesttorespondtothisneed,wesoughtinputdirectlyfrom

alargenumberofclientswithdifferentpro-files.Basedonthisinput,wehavedefinedawide-reachingprojecttoensurethatweachievethegoalofbeing‘bestofclass’inclientservice.

Manymeasureshavealreadybeenimplementedin2007inEuroclearBank.Eachandeveryclientnowbenefitsfromdirectaccesstospecialistswithindifferentserviceareas,locatedintheoperationaldepartmenttowhichtheirservicerelates.Everyclientalsohasanaccountmanager,whoisthedesignatedcontactpointforthemonitoringofaccountactivityandanescalationpointifrequired.

Theresultsfromthe2007ClientSatisfac-tionSurveyareaclearsignalthatthisinitia-tivehadanimmediateandnoticebleimpactonclients.Clientservicecriteria(suchastelephoneservicelevelsandquickresponsetoqueries)forEuroclearBankwereratedover4.5%higherthanin2006.

Furtherimprovementsarebeingrolledoutduring2008.All(I)CSDsareexpand-

Increasedclientsatisfactionatall(I)CSDs

Euroclear’s transformation into a client-

driven business over the past two years

is nothing short of remarkable.

From being more of a utility, Euroclear

has evolved into a full-blown business

partner that listens to its clients’

demands. This has resulted in a major

overall improvement in its client service,

from the day-to-day service we receive

all the way up to top management.

Well done. Keep up the good work.

TomS.JensenSenior Vice President Head of Securities Services Danske Bank


ingbothqualitativeandquantitativekeyperformanceindicatorstoensureclosemonitoringofservicelevelsasawholeandincreasedtransparencyontheserviceprovidedtoclients.

MajorstepsinimprovingservicinginAsiaFormanyyearsnow,EuroclearBankhasserveditsimportantclientbaseinAsia,withstrongclientrelationshipandclientservicefunctionsoperatingfromthreelocations:Tokyo,SingaporeandHongKong.EuroclearBankhasestablisheditselfasthepreferredgatewayforAsianfinancialinstitutionstoaccesstheEuropeanandinternationalfixedincomebusiness.

AstheAsianeconomygrows,thefinancialmarketisalsoexpandingrapidly,withChinaandIndiaasmajordrivers.Anim-portantnumberofEuropeanandUSbankshaverelocatedtheiroperationscentresorprocessingactivitiestoAsia,primarilyIndia.

EuroclearBankisrespondingtothediverseneedsoftheAsianmarketsbybuildingonitspresenceintheregion.Twokeyinitiativesin2008,whicharepartofourlonger-termstrategy,demonstrateourcom-mitmenttotheAsianregion:• theexpansionoftherepresentativeoffice

inHongKongtobecomeabranchofficeinQ22008,withseveraladditionaloper-ationalfunctionstobeoffereddirectlyfromthenewbranch;and

• theopeningofafully-staffedrepresenta-tiveofficeinBeijing.

MovingkeyoperationsfunctionstoHongKongwillsignificantlyimprovetheservic-ingoftheAsianclientbaseasawhole.The

branchofficewillinitiallyhaveabout50employees,operatinginthesametimezoneasourclientsintheregion,allowingforasignificantextensionoftheprocessingandservicewindows.

Initially,wearefocusingonthestreamsofservicesthatrequirethemostfrequentsup-port,suchasincome,settlement,newissues,moneytransferandcorporateactionsservic-es.ThepresenceofoperationsstaffinHongKongwillenableinformationdistributionandprocessingtotakeplacefullywithinthesametimezone.Asaresult,waitingtimesforAsianclientswillbedramaticallyreduced.

OurnewofficeinBeijingwillenableustooffersuperiorcareandsupporttoclientsinChina.OurlocalpresencewillallowustooffermuchcloserandmorefrequentsupporttoChinesefinancialinstitutionsandtodevelopfurthercontactswiththemarketasawhole.

EuroclearBankopensFrankfurtofficeIn2007,EuroclearBankopenedarepre-sentativeofficeinFrankfurt,inordertoofferadedicatedservicetoitsclientbaseinEurope’slargesteconomy.Beyondofferingdirectaccesstospecialisedsupport,EuroclearBanklooksforwardtoexpandingitsserviceofferingandclientbaseinGermany.Today,over80%offoreignholdingsinGermandebtsecuritiesareheldthroughEuroclearBank.WehavealsoappliedundertheCodeofConducttoEurextoopenaninter-operabilitylinkwiththeaimofofferingsettlementandassetservicingforGermanequities.ThewillingnessofEurextogiveustherequestedfeedwillbeanimportanttestoftheefficiencyoftheCodeofConduct.

42I

Performing strongly across the group


Euroclear Bank

2007hasbeenaveryactiveyearintermsofservicedevelopment,withmajorinitiativesandnewdevelopmentsacrosstheinstru-mentswetraditionallyserviceaswellasdiversificationintonewareas.

Ourroleistoexpandourexpertisetothoseclassesofinstrumentwhereourclientsareactiveandrequireimprovedback-officeprocessingefficiency.

Atthesametimewearestrengtheningourroleasasingleaccesspoint,therebycontinuouslygeneratingneweconomiesofscaleforthebenefitofourclients.

Twonewproductsweresuccessfullylaunchedin2007(underthetrademarknamesofFundSettlePremierandDerivManager).Thisprocesscontinuesin2008,startingwithClimateSettle,asettlementandsafe-keepingserviceforcarbonemissionrights.

Withthesenewproducts,likeourexist-ingproducts,ourgoalistodelivermoreefficient,cross-bordersolutionsthatreducecostandrisks.

DebtsecuritiesThegrowthoftheeurobondbusinessinrecentyears,togetherwithincreasingdiversityandcomplexityofinstruments,hascreatedprocessingchallengesinareassuchasissuanceandassetservicing.Tooptimiseefficiency,EuroclearBank,togetherwithClearstreamBankingLuxembourg,launchedaprogrammein2007todefinenewprocessingstandardsfortheservicingofinternationaldebtsecuritiesprimarilydepositedintheICSDs.Itisbeingrolledoutundertheguidance

oftheISMAG,anewmarketsteeringcommittee.Formoreinformationonthisinitiative,pleaseseepage32.

Wehavealsoextendedourrangeofmarketlinkstoinclude:

• Slovenia,MalaysiaandtheDubaiInternationalFinancialExchangeLtd.(DIFX);and

• JGBsforbothdomesticandcross-bordersettlement.TheacceptanceofJGBsaseligiblecollateralisamajorstepforwardinthepossibilitiesforcollateralisationforclients.

Inaddition,thelinkswithAustralia,Canada,Japan,PortugalandtheUnitedKingdomhavebeenenhanced.

OurofferingtoprimarydealershasbeenextendedtotheentireEuronextzone.Thisservicehasalreadyattractedimportantbusinessvolumes.

EquitiesIn2007,EquityReachwassuccessfullyintroducedasthetrademarknameforEuroclearBank’sequitiesservice.TheservicehasbeenfurtherenhancedfortheEuronextzoneduring2007,wherewenowachievehighservicelevels.Theaimfor2008istoalignadditionalEuropeancountriestothishigherservicelevel,andtoenhanceaccesstomorecountries.

Withimportantfeereductionsin2007fortheEuronextzone,theserviceiscon-tinuallyattractingmoreclients,includingbothlargeandmedium-sizedfirms.

44I Delivery

FundsOurfundsbusinesscontinuestoexpand,withtotalclientholdingsinfundsincreas-ingby20%inEuroclearBankin2007.ThenewFundSettlePremierservice,whichoffersthird-partyfunddistributorsfaster,moreefficientprocessingatalowercost,wassuccessfullyintroducedin2007.

Otherserviceenhancementswereimple-mentedduring2007includingimprovedtransferinstructions.Coveragehasalsobeenfurtherexpanded,withover36,000fundsnoweligibleinFundSettle.

DerivativesEuroclearBankhasrespondedtothegrowingneedforanexposuremanagementsolutionbyintroducingDerivManagerinQ42007.Theservicewasdevelopedinclosecollaborationwiththemarket,andisanimportantsteptowardsprovidinggreatertransparency,flexibilityandautomationinmanagingbilateralexposure.

Mostofthetopsixmarketparticipants,amongothers,havealreadysubscribedtotheservice.ForfurtherinformationonDerivManager,pleaserefertopage34.

EmissionrightsEuroclearBankisenteringthefast-grow-ing,worldwidebusinessofcarbonemissionrightstradingin2008.Thenewsettlementandsafekeepingservice,ClimateSettle,un-derlinesEuroclear’scommitmenttoincreas-ingefficiencyacrossconstantlyevolvinganddiversifyingmarkets.

Severalmajorfinancialinstitutionsthatareincreasinglyactiveinthisbusiness,mostly

existingEuroclearclients,haveexpressedastronginterestinusingtheservice.AdditionalinformationaboutClimateSettleisavailableonpage36.

CollateralmanagementEuroclearBankprocessedparticularlyhighvolumesoftransactionssuccessfullyonitstripartyplatformin2007.Anumberofrecentindependentsurveyshaveconfirmedthestrengthoftheservice,withEuroclearBankgainingtopscoresinparticularforefficiencyandclientsupport.

TheservicewasfurtherstrengthenedinFebruary2007bythelaunchofcollateralre-usecapability,whichenablescollateraltakerstore-usethecollateralreceivedinonwardtripartytransactions.Theintroduc-tionofJGBsonthetripartyplatformhasincreasedtherangeofeligiblecollateral.Furtherenhancementsincludedanextend-eddeadlineforsame-dayfinancingandbetterreporting.TheAutoSelectmodulehasbeenoptimisedtofurtherimprovecollateralallocations.

SecuritieslendingandborrowingTheservicewasenhancedin2007bytheextensionoftheend-of-daylendingandborrowingprocessacrossallmarkets,whichallowsborrowerstoreimburseloanslaterintheday.Thepooloflendablesecuritieshasbeenenlargedby15%asaresultofextendedeligibilitycriteria.

AstabilisingfactorinturbulenttimesEuroclearBank’srobustpositionaspartofthesettlementinfrastructurehasprovidedstabilityinthemarketduringthesubprimecreditcrisis,asdiscussedonpage62.


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TheDVPmodelthatEuroclearBankoffersforcross-bordersettlementensuresthatitcontainsthesystemicrisksthatcouldresultfrompotentialsettlementfailuresandthatliquidityismaintained.

Withits‘singlepurpose’bankingfunction,EuroclearBankwasabletoreassurethemarketthatefficientsettlementwouldcon-tinueasnormal.EuroclearBank’sexposuresaremainlyintra-day,andwedonotlendlongtermorholdsubprimeinvestments.Ourlowriskprofile,withabout99%ofourclientexposurecollateralisedbyhighqualityassets,meantthatwewereabletosatisfyourliquidityneedsasinnormalcircum-stances,andinturnprovidenormallevelsofcredittoourclientstosupporttheiractivitythroughoutthesubprimecrisis.

EuroclearBankholdsaverylargeanddiversepoolofcollateraltotalling€2.4trillioninmarketvalue,whichispledgedwithstrongvaluationmechanisms.Collateraliseddebtobligationscompriseonly1.5%ofthewholepool.Furthermore,ourtripartycollateralmanagementservices,withEuroclearBankasneutraltripartyagent,allowedmajorfinancialinstitutionstooptimisetheuseoftheircollateralandavailableliquidity,andprovidedopportuni-tiestomobiliseglobalcollateral.

OntrackforMiFIDEuroclearBankhasintroducedproceduresfortheclassificationofclients,andchangeshavealsobeenmadetotransactionreport-ingservicesinordertomeetrequirementsforincreasedtransparency.

MajorchangestoclientserviceInlinewithchangingclientexpectationsandmarketconditionswhereinstruments,primarilybonds,arebecomingmorecomplex,EuroclearBankhassubstantiallyimproveditsclientservice.Eachclientnowhastwowaysofcontactingus:• directcontactwithspecialistteamswho

haverelocatedtoworkalongsideopera-tionaldepartments,takingfullowner-shipofclientrequestsanddeliveringcompleteend-to-endsolutions;and

• dedicatedaccountmanagers,whoactasacentralescalationpointforopera-tionalissuesandoverseetheiropera-tionalactivity.

ClientSatisfactionSurveyOverallrateofsatisfaction:2007:74.14%2006:70.98%

Therewasasignificantincreaseinclientsatisfactionlevelsin2007.Thisisevidencethatthe‘bestofclass’initiativeisbearingfruit.Clientshavesaidinparticularthattheyarehighlyappreciativeofthecalibreofemployeesandthesupportprovidedbylocaloffices.

As an Asian banking specialist, DBS

welcomes Euroclear’s establishment of

an operations centre in the region, which

underscores its commitment to Asia.

Euroclear recognises its clients’ growing

needs and is taking the lead in bringing

service excellence to clients in Asia.

ElizabethChiaManaging Director Head of Securities Services DBS Bank Ltd

Keyfigures

Strong growth was achieved in all areas in spite of the turbulent market conditions.

Turnover

€284.5trillion +30%

Holdings

€9.2trillion +14%

Numberoftransactionsafternetting

40.8million +20%

Collateralprovisionoutstanding

€�28.1billion +6%

46I Delivery

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SupportingissuersasdematerialisationcontinuesAmajorsteptowardsfulldematerialisation,duetobecompletedin2013,wasachievedin2007.EuroclearBelgiummetthefirstcriticaldeadlineinthemovetoapaper-freecapitalmarketattheendof2007,withtheautomaticconversionofsomeBelgianbearersecuritiesintodematerialisedsecuritiesrepresentedbyelectronicregistrationwithafinancialinstitution.ThiswasconductedwithfullmarketparticipationcoordinatedbyBelgium’sDematerialisationTaskForce,comprisingrepresentativesfromBelgianissuers,NYSEEuronext,notaries,financialinstitutions,theNationalBankofBelgiumandEuroclear.

Overthepastthreeyears,aspartofthedematerialisationprocess,EuroclearBelgiumhasdestroyedabout15millionpapersecuri-ties,representingabout250tonsofpaper,witharemaining40millionsecuritiestar-getedfordestructioninthecomingsixyears.

EuroclearBelgiumhasdevelopedCapitrack,anewservicetohelpissuersinthedema-terialisationprocess.Capitrackprovidesanup-to-dateviewoftheforminwhichsharesarebeingheld,allowingissuerstoeasilymonitorthedematerialisationoftheirissuedsecurities,aswellasgettingabetterpictureoftheownershipoftheirsharecapi-tal.AllEuronextBrussels-listedcompaniesontheregulatedandnon-regulatedmarketshavesubscribed,andtheservicehasnowbeenextendedtonon-listedcompanies.

Asecondphaseoftheservice,deliveredinJanuary2008,allowsissuerstoobtainsupportservicesforthemanagementof

theirshareholderregisterfromEuroclearBelgium.Severalmajorissuershavealreadysubscribed.Tosupportthegrowingrangeofissuerservices,anewIssuerRelationsteamhasbeensetupwithinEuroclearBelgium.

MeetingthegrowingneedsofthemarketEuroclearBelgiumhastakenimportantorganisationalmeasurestomeetthemulti-plechallengesahead.Alongsidetheforth-cominglaunchofESES,thedematerialisa-tionprocessandrisingvolumes,thesehaveenabledEuroclearBelgiumtocontinuetodeliverhighqualityday-to-dayservicesandserviceenhancements.

EuroclearBelgiumcontinuestobuildonitsstrengths,forinstanceasaholderofphysicalsecurities.In2007,itexpandedthescopeoftasksperformedonbehalfofEuroclearBankinthecontextoftheim-plementationofNewGlobalNotesintheinternationalcapitalmarkets.

WealsosuccessfullyprocessedthelargestevercapitalincreaseinBelgium’shistoryforFortisBank,resultinginadepotincreaseof€13billion.


Theincreaseofover2%inthesatisfactionrateillustratesourclients’positivefeedbackonsystemreliabilityandtheSWIFTcom-municationinfrastructureinparticular.Clientscoresalsohighlightthestrengthsofourstaffandthesuccessfulmanagementofthedematerialisationproject.

Euroclear Belgium

The migration to electronic registration

is an important milestone in the moderni-

sation of Belgium’s securities market.

The excellent work conducted by

Euroclear Belgium and financial inter-

mediaries, together with dematerialisa-

tion monitoring tools such as Euroclear

Belgium’s Capitrack, significantly eased

the transition for UCB.

MichèledeCannartVP General SecretaryUCB SA

Keyfigures

Turnover

€510billion +58%

Holdings

€228billion -14%


2.8million +4%

A large increase in the value of transactions settled was the result of strong market activity.


ESES will provide the first ever consolidated settlement and custody solution covering three markets: Belgium, France and The Netherlands. It represents an important step towards the delivery of both NYSE Euronext’s Single Order Book and Euroclear’s Single Platform.

Euroclear France successfully migratedIn November 2007, Euroclear France became the first Euroclear group entity to launch ESES. The legacy settlement platform Relit+ was decommissioned at the same time and key components of the RGV settlement system were used as a basis for the ESES platform.

The ESES launch has enabled very high settlement efficiency rates of 99.61% (based on cash consideration) to be achieved on average since the launch. Clients of Euroclear France have also implemented some key changes and harmonised processes in the

areas of corporate actions, settlement and payments.

The project is a good example of what can be accomplished through close and fruitful collaboration with the market. In the same spirit, an ESES market discipline operational group, composed of clients and market stakeholders, has been set up to continue to monitor settlement performance.

The second phase of the ESES programme in February 2008 involved the connection of ESES to the TARGET2 euro payment system and to Gestion Globale des Garanties (3G), the new collateral management facility provided by the Banque de France.

Focus on migration of Euroclear Belgium and Euroclear NederlandThe migration of Euroclear Belgium and Euroclear Nederland, planned for Q4 2008, will impact all three Euronext-zone CSDs. Each CSD is focusing on this migration

with high levels of staff and operational readiness. The Belgian, Dutch and French Implementation Committees comprising market participants have helped to fine tune some aspects of ESES and guide the imple-mentation process, together with dedicated working groups.

Harmonised tariff During 2007, Euroclear published its tariff for harmonised CSD services on the ESES platform. The new harmonised tariffs will apply to clients of Euroclear Belgium, Euroclear France and Euroclear Nederland as of the migration of Euroclear Belgium and Euroclear Nederland to the ESES platform. Tariffs will be reduced by about 10% as of the launch of ESES.

Preparing for ESES

48I Delivery

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FullyautomatedfundsprocessingEuroclearFrancehasbecomethefirstCSDinEuropetoprovidefullSTPforfundsorderroutingandsettlementwiththelaunchofthesecondphaseofitsfundsserviceinApril2007.Theprocessisnowfullyautomated,fromtheplacingofordersthroughtosettlement.

Theserviceisprovingattractivetoclientsandbytheendof2007wewereprocess-ingover10,000instructionspermonth.Accountholdersrepresentingmorethan45%ofinvestmentfundorderflowsandcentralisingagentsaccountingforabout80%ofallorderflowsinFrancearenowconnectedtotheplatform.

TheservicewillbeexpandedtoBelgiumandTheNetherlandsonceESESislaunchedinthesecountries.

ReadyforMiFIDMiFID-relateddatacannowbeincludedinSBItransactionnoticessentbybrokerstointermediaries.TheSBIplatformisbeingfurtherdevelopedinQ12008,basedontherecommendationsofaspeciallycre-atedmarketworkinggroup,withaviewtoitbeingextendedasasolutionformultiplemarkets.

InlinewiththerequirementsofMiFID,EuroclearFranceisnowabletosettletrans-actionsfromalternativeCCPsortradingplatforms.

EnhancedcollateralmanagementTheavailablepoolofcollateralhasbeenextended,withadditionalforeigndebtsecu-ritiesbecomingeligibleforthecollateral

mechanism(Finnish,ItalianandSpanishcorporatedebt,aswellasGreekandPortuguesegovernmentdebt).WearealsoworkingonimprovedSTPforcross-borderlinkstoforeignCSDsforECB-eligibledebtcollateral.

WehavecollaboratedwithBanquedeFranceonits3Ginitiative,whichisintendedtocreateacentralisedpoolofcollateralfortreasuryoperationswiththecentralbank.


Forthefourthyearinarow,thesurveyresultsshowedanoverallsatisfactionrateincrease,withgoodprogressmadeinmostareas.HighscoreswereobtainedforactionsrelatingtoESES,reflectingthecarefulhandlingofthemigrationandourongoingandopencommunicationwiththemarket.Thequalityoftheserviceprovidedhasalsobeenparticularlyrecognised.

Following three years of intensive work

and careful preparation by all parties,

Euroclear France smoothly implemented

the first phase of ESES. A major step

towards European consolidation has

been successfully achieved.

Jean-MarcEyssautierChief Executive OfficerCACEIS Bank

Euroclear France

Keyfigures

Turnover


Holdings

€5.�trillion +6%


�2.�million -1%

A significant increase was recorded in the value of transactions settled.


>

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>

EnhancedassetservicingIn2007,EuroclearNederlandfurtherupgradedassetservicing.Inordertode-creasethenumberofmarketclaims,attherequestoftheDutchmarket,arecorddatewasintroducedfordistributionstobringTheNetherlandsintolinewithEuropeanharmonisationstandardsaheadofthelaunchofESES.EuroclearNederlandalsoimproveditsprocedures,acceleratingtheadmissionofsecuritiestoitsbook-entrydepositsystem.Inaddition,aFrenchwith-holdingtaxreclaimservicefornon-Dutchresidentshasbeenintroduced.

DematerialisationprogressTheprincipleofmandatorydematerialisa-tioninTheNetherlandswasapprovedbymajormarketstakeholders,includingEuroclearNederland,in2006.During2007,EuroclearNederlandhasactivelyparticipatedinadematerialisationworkinggroupwhichhasbeenhelpingtodraftabillundertheauspicesoftheDutchMinistryofFinance.Thedraftbillproposesatwo-yearmigrationphasetowardsfulldematerialisa-tionofphysicalsecuritieswiththeexceptionofglobalnotes.TheworkinggroupaimstosubmitthebilltotheDutchParliamentforfinalapprovalin2008.EuroclearNederlandisanticipatingareductioninthenumberofphysicalsecurities,whichhavealreadydecreasedby21%in2007.

SettlementsolutionfornewtradingplatformsAlternativetradingplatformsinvolvingmulti-CCPsenteredthefinancialmarketinTheNetherlandsinQ22007.EuroclearNederlandrespondedtotheirsettlementneedsbyofferingsettlementfortradesin

DutchequitiesstruckontheseplatformsandnettedthroughtheseCCPs.

NationalNumberingAgencyInQ12007,EuroclearNIECbeganoperatingasNationalNumberingAgencyforDutchsecurities,arolepreviouslyperformedbyEuronextAmsterdam.ThisbringstheDutchCSDinlinewithEuroclearFranceandEuroclearBank,whichalreadyactasnumberingagencies.


Improvedscoreswerereceivedforclientserviceandservicedelivery,theresultofaclearlyarticulatedactionplanwhichtookintoconsiderationcommentsfromthepreviousclientsurvey.Communicationwiththemarketwasalsoratedhighly,withthecreationoftheESESImplementationCommitteeregardedasagoodinitiative.

We continually experience valuable

improvements in the level of support

provided by Euroclear Nederland.

We very much appreciate that they are

always willing to listen and consider

our suggestions concerning future

service enhancements.

HansvanderWaalHead of Securities OperationsABN AMRO Bank

Euroclear Nederland

Keyfigures

Turnover

€5.6trillion +60%

Holdings

€945billion -1%


4.6million +21%

Transaction volumes reached an all time high, reflecting strong market activity.

50I Delivery

>

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>

>

SignificantincreaseinvolumesAcombinationofmarketvolatilityandtheriseinalgorithmictradingresultedinunprecedentedvolumeincreasesatEuroclearUK&Irelandin2007,witha76%riseingrosstransactionscomparedto2006.Settlementprocessingfunctionedwellduringhigh-volumeperiods,andEuroclearUK&Irelandisimplementingaseriesofsystemupgradestoensurecapac-ityforfuturegrowthismaintained.

MajortariffreductionsforclientsEuroclearUK&Irelandpaid€11mil-lioninrebatestoclientsinearly2007,inproportiontotheiractivityduring2006.Furthertariffreductionsof€16.5millionin2008aredeliveringa50%reductioninclearing-relatedservicefeesanda10%reductioninsettlementfeesforbothretailandwholesaleclients.

SinglePlatformpreparationsSinceEuroclearUK&IrelandisnotpartoftheESESprogramme,thelaunchofSinglePlatformCustodywillbethefirstmigrationfortheUnitedKingdomandIreland.Preparationisnowwellunderway,withthesetupoftheSinglePlatformImplementationForuminOctober2007.TheForum,whichincludesarepresentativesetofclients,meetsregularlytoshareinfor-mationbetweenEuroclearanditsclientsinatimelyfashion.

ProvidingsolutionsforaconstantlyevolvingmarketplaceTheever-changingneedsoftheLondonmarketplacemeanthatEuroclearUK&Ireland,asaninfrastructureserviceprovider,mustshowgreatflexibilityin

respondingtothem,whileatthesametimeassessingprioritiesandmanagingacrowdedlaunchschedule.In2007,EuroclearUK&IrelandhasdeliveredenhancementstosupportFortisBankasaCCPandEurexClearingAGinitsforthcomingCCProle.ChangeshavealsobeenintroducedtoallowthedirectinputofDBVinstructionsandassociatedrepointerestpaymentstosup-portLCH.Clearnet’sRepoClearservice.

Inadditiontothehistoricalaccessprovid-edtotheLondonStockExchangeandLCH.ClearnetforLondonStockExchangetrades,sixotherinfrastructuresalreadyhaveaccesstoEuroclearUK&Ireland.Wearenowfollowinguponeightrequestsfromthreeparties,includingEuroCCPforTurquoisetrades.

TailoredtransactionreportingservicesforMiFIDInNovember2007,EuroclearUK&Irelandintroducedtransactionreport-ingservicescompliantwithMiFID.Thechangesallowclientstomeettheirrevisedtransactionreportingresponsibilitiesinaflexibleandcost-effectivemanner.

IntegrationunderlinedbychangeofnameCRESTCo’sreputationasastronglocalbrandmeantthatthecompanydidnotchangeitsnameimmediatelyafterthemergerwithEuroclearin2002.Followingmarketanalysisthatshowedsupportforachangeofname,theentitywasrenamedEuroclearUK&IrelandinJuly2007.

Euroclear UK & Ireland

We fully support the harmonisation

process and the Single Platform.

As an Irish market participant, we look

forward to seeing how the services of

Euroclear will evolve and the resulting

efficiencies.

EamonnDoyleChief Operations OfficerDavy

Keyfigures

The significant increase in volumes has been driven by strong activity in the UK and Irish markets.

Turnover


Holdings

€�.5trillion -8%


75.0million +7%

Collateralprovisionoutstanding

€266.9billion +16%


>

SignificantincreaseinvolumesIn2007,EMXCoensuredcontinuityandachievedsustained,substantialgrowthtostrengthenitspositionasthedefactosolutionforfundsmessaging.EMXCohasseenagrowthof97%infundflowsand44%inmessagesduring2007,meetingkeyperformancetargets.

ThegrowthwasduetoexistingparticipantsincreasingtheirusageoftheEMXMessageSysteminadditiontothelargenumberofnewjoiners–15providersand48interme-diaries.Thisresultedinayear-endtotalof208intermediariesand76providers.

ImplementingnewsystemsAnewsystemsarchitecturewasseamlesslyimplementedatthesametimeasachangeofhostproviderwhilemaintaining100%systemavailabilitythroughout2007.

EMXCo


ImprovedscoreswereobtainedineachofthethreemainsectionsoftheEuroclearUK&Irelandquestionnaire–‘people’,‘clientservice’and‘coreservices’.TheactionsthathavebeentakentoimprovethestabilityofcoreservicesandtheopencommunicationthatfollowedtheSSElaunchhavebeenparticularlywelcomedbyclients.

CombiningfundorderroutingandsettlementintheUKFollowing Euroclear’s acquisition of EMXCo

in January 2007, EMXCo and Euroclear UK &

Ireland have been working to deliver a sub-

stantially more efficient combined solution

for UK funds. These efforts are supported by

a Funds Liaison Group, comprising senior

executives from across the fund industry,

which was created to provide a forum for

market consultation.

The first phase of the solution, which will

offer improved cash settlement, will be

launched in 2008. The second phase, a cash

and securities settlement solution, is planned

for 2009, and will enable funds to achieve a

level of settlement efficiency similar to other

instruments such as bonds and equities.

Without the EMX Message System we

would have found it difficult to grow

as quickly and as profitably as we have

done. The acquisition of EMXCo by

Euroclear is a very positive development

and we look forward to being able to

benefit from the efficiencies that settle-

ment will bring and reducing our costs

still further.

MarkLinksHead of OperationsIntegrated Financial Arrangements PLC (Transact)

Keyfigures

Routedmessages

19million +44%

True responsibility is being there before you’re needed. Nobody understands the role Euroclear has to play better than we do. We not

only have a duty to our individual financial institutions, but to the system as

a whole. It is our responsibility to ensure continuity and sustainability in the

world’s markets at all times. But we believe our company can make a difference

as well as keep things the same. That’s why we’re also conscious of the respon-

sibility to our people, our environment and our society. Not because it’s fashion-

able. But it cements a stronger relationship with a wider world.


True responsibility is being there when you’re neededWe truly understand the role we have to play. We not only have a duty to

individual clients, but to the financial system as a whole. It is our responsibility

to manage risk and ensure sustainability in the world’s markets at all times.

But we believe our company can make a difference in other ways too. That’s

why we’re also conscious of the responsibility to our people, our environment

and our society. Not because it’s fashionable. But because it cements a

stronger relationship with a wider world.

Responsibility

54I Responsibility

Serviceexcellence,ambitiousprogrammesandinnovativesolutionsallthriveonthequalityofthepeopleinvolved.Weareproudthatthefeedbackfromthe2007ClientSatisfactionSurveyparticularlyrecognisedthehighqualityofourstaff.Aboveall,Euroclearvaluesitspeopleandunderstandstheneedtomanageandinvestinitshumancapital.

Wearealeaderinourfieldandaimtocontinuemakingadifferencethroughourskills,know-howandcreativity.Toattainthisobjective,Euroclearalsowantstoberecognisedasanemployerofchoiceacrossthefinancialworld.

Weaimatcontinuouslyattractinganddevelopingthebrightesttalentinorder

tomeetand,wherepossible,exceedclientexpectations.Weofferourstaffcompetitivecompensation,astimulatingworkingenvi-ronment,self-developmentandlong-termcareeropportunities.

Ourresourcemanagementprogrammeisbasedonourcorporatevalues,withastrongemphasisonmanagingtalentandrecognisingachievement.

ManagingtalentEuroclearhasover3,600employees.Ourexplicitsearchfordiversityovertheyearshasmadeasignificantcontributiontoourcurrentstrength.Awideculturalmix,alargevarietyofskillsandawide-rangingexpertiseinourfieldarekeycontributingfactorstoacompetitiveadvantage,the

significanceofwhichwillonlyincreaseastheglobalisationofoursectorcontinues.

Thegroupholdsastrongbeliefinthecapabilitiesofitspeopleandaimstoofferaframeworkinwhichindividualsandteamscanmakethemostoftheirtalentsandam-bitions.Wehaveastronginternalmobilitypolicyofferingouremployeesexcellentopportunitiestodeveloptheircareerwithintheorganisation.Thankstothesuccessofthispolicy(18%ofourstaffmovedtoanewrolein2007,comparedwith16%in2006)andacontinuedincreaseininternationalmobility,thegroupgreatlybenefitsfromthemultipleandcross-marketexpertisegainedbyitsstaff.Furthermore,webalanceexpertisedevelopedin-housewithtalentrecruitedexternally.

Eurocleargrouppeopleprofile (as at December 2007)

Numberofemployees �,619

Europe �,551

- Belgium 2,632

- France 428

- The Netherlands 78

- United Kingdom 403

- Other European countries 10

Asia 52

Americas 16

Staffincreasein2007 �29

Genderbalance 51%male–49%female

Nationalitiesrepresented 74

Averageage �5

Averagelengthofservice 8years

People


Amidgrowingbusinessvolumesandacompetitiverecruitmentmarket,attractingnewstaffwasoneofourmainchallengesin2007,with780newrecruitsjoiningthegroup.Toachieveourfutureobjectives,wehavefurtherinvestedinrecruitmentandarestrengtheningEuroclearasarecognised‘recruitmentbrand’.

Weinvestsignificantlyinregulartrainingforbothnewrecruitsandexistingstaff.In2007,weinvestedanaverageof5.4daysontrainingperemployee,represent-ing3.4%ofthetotalsalaryexpenditure.Businessandpersonaldevelopmenttrain-ingisprovidedthroughoutanemployee’scareer.Particularattentionisalsobeingpaidtodevelopingpeoplemanagementskills.Thegroupconsiderstheseskillsasvitaltoitssuccess;goodpeoplemanage-mentbeingessentialtoemployeemotiva-tion.Peoplemanagementcourseshavebeenmademandatoryforeverynewpeoplemanager.Careerdevelopmentandsuc-cessionplanningareotherpointsoffocustoensurehighlevelsofmotivationandcontinuity.

Withinourlargestoperationsgroups,wehavealsolauncheda‘Lean’changemanage-mentprogrammethatfocusesasmuchonpeopledevelopmentaspects(suchasdailyperformancemanagement,skillbuilding,

mindsetandbehaviour)asonpureprocessimprovements.Thisholisticapproach,insteadoffocusingsolelyonshort-termoperationalenhancements,providesacon-tinuousimprovementenvironmentthatenableseveryindividual–whateverhisorherlevel–tocontributetomakingEuroclearabetterandstrongercompany.Euroclear’sLeanprogrammeempowersitsemployees,increasesjobsatisfactionandallowsachieve-mentstobeproperlyrecognised.

RecognisingachievementsIn2007,theEurocleargrouphascontinuedtomovetowardsanevenmoreperformance-drivenrewardandcompensationsystem.Wehaveadjustedourremunerationpolicytoensurethatcompensationpackagesareincreasinglyharmonisedthroughoutthegroupanddifferentiatedaccordingtoindividualperformance,subject,ofcourse,toappropriatelocalstandards.

ThetotalbonuspoolisdeterminedonayearlybasisbytheBoardofDirectors.Indoingso,theytakeintoaccounttheresultsoftheBalancedScorecard.Thisisagroup-widesetofperformanceindicatorscoveringimportantareassuchasclientsatisfaction,theprogressmadeindeliveringtheSinglePlatform,theoperationalandfinancialperformanceofthegroupandsomeHR-relatedmatters.

Wearealsotakingadditionalinitiativestorecogniseemployeeachievements.Forexample,inlinewithourgoalofprovid-ing‘bestofclass’servicequality,asystemofsmallawardshasbeenimplementedforindividualorteamperformancethatexcelsinclientfocus.

ClimatesurveyEachyear,Euroclearorganisesaclimatesurvey.In2007,atotalof66%ofstaffrespondedtotheclimatesurvey,comparedto69%in2006.Thissurveyallowsustomeasureemployees’emotionalandmoreobjectiveattachmenttoourcompany,whichareimportantmotivationalfactors.Thesurveyincludesquestionswhichgaugeemployees’levelsofsatisfaction,motivationandloyalty.Theresultsareusedtomeasureandcontinuouslyimprovetheoverallcorporateperformancethroughemployeeengagement.

Markedincreasesinappreciationwereseenforpeoplemanagement,reflectinggreatereffortsinthisdomainandtheavailabilityofcareeranddevelopmentopportunities.

Inaddition,employeesexpressedastrongwishtofurtherintegrateandcontributetoagroupwithanexcitingvisionandclearstrategies.

2005

2006

2007

Climatesurveyresult

67.1%

67.3%

68.7%

56I Responsibility

Itisessentialthatcompaniesareawareofthesocialandeconomicimpactoftheiroperations.

Wearealong-standingleaderinourindus-trythankstotheapplicationofprofessionalcompetenceandthefocusonlong-terminvestmentsandrelationships.Wealsoaimtoleadbyexampleinourcorporaterespon-sibilitystrategies,whicharedrivenbythesamevaluesofcompetenceandlong-termsustainability.

CorporateresponsibilityatEurocleartakesplaceontwomainlevels–inourwiderresponsibilityasakeyplayerinthefinancialmarket,andinhowwedealwithpeopleandtheworldaroundusonaday-to-daybasis.

Farfrombeingawasteofresources,webelievethatdemonstratingenvironmentalandsocialleadershipwillhelptobuildthetrustofthepublicandofemployees,andcanstrengthenacompany’sreputa-tionamongallitsstakeholders,includingitsclientsandshareholders.Itisourviewthatcompaniesthatrecognisethevalueofcorporateresponsibilityattractpeoplewhoarebothtechnicallyproficientandinclinedtothinklongterm.

DoingwhatisrightforthemarketEuroclearisauser-ownedanduser-governedorganisationwithadutytoensurethatwhatwedoisrightforthemarket.Wearealeaderinafieldthathasparticularsignificancefortheefficiencyandsafetyofthefinancialinfrastructure.Anumberoffeaturesthatareintegraltoasecureandefficientrunningofouroperationsarethereforeourcorecorporateresponsibility.Forexample,we

havedevelopedleadingresiliencestandardsthroughtheimplementationofstate-of-the-artbusinesscontinuityarrangements,whichshouldallowustosustainoperationsevenintheeventofaregionalscaledisaster.OurongoingworktointegratesystemsandharmonisemarketpracticeshelpstocreateamoreefficientEuropeanmarket.Thisinturncancontributetothecreationofwealthandwell-beinginEuropeandbeyond.

Companiescanalsohelpbyapplyingtheirskillstodevelopnewmarketswithenviron-mentalorethicalvalue.WiththelaunchofClimateSettle,EurocleariscontributingtothesuccessofcarbonemissionrightsissuedundertheKyotoProtocol.Thenewservicesettlestradesincarbonemissionrights(seepage36formoreinformation).WebelievesuchinnovationcanaddrealclientandbusinessvaluewhileatthesametimehelpingtodecreasetheadverseimpactofindustryandbusinessontheenvironmentviathemechanismsdefinedintheKyotoprotocol.

TakingcareofourpeopleandtheenvironmentEuroclearisalsoconvincedbythevalueofcorporateresponsibilityinitsmoreconven-tionalsense.Wehaverobustpoliciesandavarietyofinitiativesinplacetoprotectandofferopportunitiestopeople,bothwithinandoutsideofthecompany.

SomefactsstandoutwhenlookingatEuroclear’speopleasawhole:weareatrulymulti-culturalcompanywithcloseto75nationalitiesrepresentedamongour3,600staffandanalmostequalgenderbalance.

Thesefiguresaretheresultoflong-standingprinciplesonequality,non-discriminationandafirmbeliefthatanorganisationcanonlybeinternationallysuccessfulinthelongtermifitattractsandtrainstalentedpeoplefromdiverseculturesandbackgrounds.

Work-life balanceItisouraimthatemployeesacrossthegroupareliterally‘feelinggood’workingatEuroclear.RecognisingthatEuroclearisademandingandcompetitiveenvironment,weaimtoofferahealthywork-lifebalancetoourstaff.Euroclearhascreatedagroup-widefunctiondedicatedtowork-lifebalance,themainobjectivesofwhicharetoimprovewell-beingatworkandtoaddressthemaincausesofstressintheworkplace.

Weoffervariousflexibleworkarrangementswhicharewidelyappreciatedbyemploy-eesatdifferentpointsintheircareersandpersonallives.

Weorganisehealthylifestylecampaignsandsportandentertainmenteventsforstaffandtheirfamiliesacrossthegroup.In2007,amajor‘eatwell’campaignwasrolledout.Otherexamplesincludehealthymenuoptionsincompanyrestaurants,theweeklyprovisionoffruittostaff,andfinancialcon-tributiontosportsandfitnessactivities.

Equality and non-discriminationApolicyofnon-discriminationunderpinsouremploymentpolicyandwealsoprovideopportunitiesforpeoplewithdisabilitiesaccordingtotheircapabilities.Inaddition,weconsultregularlywithemployees,ortheirrepresentatives,incompliancewithnationalemploymentlaw,ensuringthecompany

Corporate responsibility


takestheirviewsintoaccountwhenmakingdecisionslikelytoaffectstaffinterests.

Code of ethicsEuroclearattachestheutmostimportancetoitsreputationforintegrity,honestyandfairnessinitsconducttowardsitsemploy-eesandcontractors.Ithasalsoestablishedclearstandardsofbehaviourexpectedfromallthoseassociatedwithitinreturn.Theseprinciplesaresetoutintheorganisation’sEthicalConduct,LegalandComplianceRiskpolicy.

Health and safety Eurocleariscommittedtohealthandsafetyandtheprotectionofpeople,propertyandtheenvironment.Wearecontinuouslyrefiningourpoliciesandproceduresinordertoprovideanevenmorerobusthealthandsafetymanagementsystem.Weaimtosetandmaintainhighstandards,ensuringthehealth,safetyandwelfareofouremployees,contractorsandvisitors.

Weunderstandtheimportanceofintegrat-inghealthandsafetyconsiderationsintoallaspectsofourbusinessandfullyrecognisetheadvantages.Wewilldrivecontinualimprovementofbothourhealthandsafetymanagementsystemandourperformance.Euroclearrecognisesthatthenegativeimpactofwork-relatedstressonpeople’shealthisamajorriskintheexecutionoftheirfunctions,andthereforeplacesapar-ticularfocusonwell-beinginitiatives.

Environmental responsibilityEuroclearaimstoimplementacomprehen-siveenvironmentalmanagementsystem,anddrivescontinualimprovementofthe

systemandourperformance.Forexample,wehavecreatedlocalenvironmentalteamstomonitorandmeasureenvironmentalperformanceongoalsandinitiatives.

Weareaimingtoreducetheamountofwastethatwesendtolandfillbyimplementingwasteminimisation,reuseandrecyclingini-tiatives,andtoreduceourcarbonfootprintthroughamoreefficientuseofelectricity.

Recentinitiativesinclude:• implementationofenvironmental

awarenessaspartoftheinductionfornewstarters;

• promotionofcarpooling;• useofbio-degradableandenvironmen-

tallyfriendlymaterialsinnewlyopenedbuildings;and

• wasterecycling.

SupportingthewidercommunityEuroclearhasalsodevelopedclearviewsandinitiativestoputintopracticethewaysitwishestosupportandcontributetothedevelopmentofthewidercommunity.

Charity and community involvementEuroclearsupportsandcontributestothedevelopmentofthecommunitybyprovid-ingfinancialassistancetonot-for-profitassociations.WeencourageandsupportcharitiesinthecountrieswhereEuroclearoperates,inparticularthoseinwhichourstaffortheirrelativesarepersonallyactive.EachcountryinwhichEuroclearoper-atesan(I)CSDnowhasaCommunityRelationsCommittee,towhichstaffareinvitedtosubmitprojectsassistinglocalcharitiesdeservingsupport.Thecommittee,composedofvoluntarystaffalsoactivein

charitiessupport,decidesonwhichchari-tiesreceivedonationsinlinewithasetofagreedcriteria.

Inaddition,thereisa‘matchinggift’programme,wherebythecompanymatchesindividualdonationsmadespontaneouslybystaff.Closeto€735,000wasgiventocharityin2007.

SponsorshipAspartofoursocialresponsibility,wecontributetosocioeconomicinitiativestakingplaceoutsideourmarketcontext,butexpressingourvaluesandconvictionsofdeliveringfundamentalandlastingimprove-ment.Asanexample,in2007Euroclearsupportedaconferenceonmicrofinance,gatheringmanyoftheexpertsfromacrosstheworldinthisfield.Wehavedonethiswithoutanyintentionofgainingbusiness,andchosethisareabecauseweareconvincedoftheworthofitsinnovativeprinciplesandthefundamentalimprovementitcanbring.

Euroclear is one of five industry leaders

with major operations centres in Belgium

that established TransConstellation and

the TransConstellation Academy in 2003.

TransConstellation is a not-for-profit organ-

isation aiming to promote Belgium as a

centre of excellence in financial transaction

processing. The TransConstellation Academy

is a shared training centre run in partnership

with the Solvay Business School. In addition

to broadening the horizons of their knowl-

edge, participants are given an excellent

opportunity to form lasting relationships

with professionals from other companies.

TransConstellation

58I Responsibility

Euroclearfulfilsacentralroleinfinancialmarketsandtheeffectivenessofitsactivitiesiscriticaltothestabilityofthefinancialsystemasawhole.Itsriskmanagementpracticesthereforehavetobeofanappro-priatelyhighstandard.Bystrivingforexcellenceinriskmanagement,Euroclearcanmeetmarketexpectationsandbeastabilisingfactorinturbulenttimes.

RigorousmarketpracticesandindustrystandardsToensurecompleteandconsistentmanagementoftherisksfacedbyeachofitsservices,Euroclearhasorganiseditsriskmanagementfunctionatgrouplevel.Workingwiththebusinessareas,theriskmanagementfunctionhasdevelopedacomprehensiveriskframeworkandpolicies.Thesearebasedonindustrystandards,suchasISO17799and27001forInformationSecurity,andtheAdvancedMeasurementApproach(AMA)forOperationalRisk,aswellasmoregenericbestpractices,includinganEnterpriseRiskManagement(ERM)frameworkandacentralisedPolicyControlOffice.SeveralEuroclearentitiesmakeauditedSAS70controlstatementstoinformclientsandotherstakeholdersabouttheircontrolenvironments.Inaddi-tion,eachofthegroupCSDsandEuroclearBankcompleteandpublishannuallyonwww.euroclear.comtheDisclosureFrameworkforSecuritiesSettlementSystems,whichisoneoftherequirementsforcompliancewiththeRecommendationsforSecuritiesSettlementSystems,pub-lishedbytheCommitteeonPaymentandSettlementSystems(CPSS)andtheInternationalOrganizationofSecuritiesCommissions(IOSCO).Theseframeworks

andpoliciesaresupportedbyagovernancestructurethatmakescleartheresponsibil-ityforcontrolmonitoring.Euroclearalsohasappropriatelyformalbutpragmaticprocessesandprocedures.Thesecoverbothday-to-dayoperationalprocessesandrisk/controlprocesses,whichincludetheidentification,monitoringandmitigationofrisksandincident-handlingprocesses.

In2007,Euroclearagainmademajorprogressinseveralareas.AfterhavingsubmitteditsapplicationtousetheAMAtocalculateregulatorycapitalrequirementsforoperationalriskinDecember2006,EuroclearhasusedtheAMAinparallelwiththeBasicIndicatorApproach(BIA)overthecourseof2007.Inaddition,inthesecondquarterof2008EuroclearwilldeliveritsfirstpublicdisclosureunderPillar3ofBaselII.

AnewdepartmentfocusingonStrategicandProgrammeRiskswassetupintheRiskManagementDivisioninordertomanagetherisksrelatedtothecompany’sstrategydefinitionandtheimplementationofrelatedlargestrategicprojects.

Euroclear’sriskmanagementpracticeshelptoprotectitfromthemarketturmoiltrig-geredduringthesummerof2007bythesubprimecrisis.Euroclear’smarketmodelhasplayedanimportantroleinensuringaconstantlevelofservicetoitsclients,allowingthemarkettomovesecuritiesandliquidityefficiently(seepage62).

EnterpriseRiskManagement:arisk-controlledenvironmentEuroclearusesanERMframeworktoensurethecoherenceofitsriskmanage-

mentfunction.Itconsistsofthreemaincomponents:• AllthemajorrisksfacedbyEuroclear

arelistedintheRiskRegister.Intotal,sevenriskcategorieshavebeenidenti-fied.ThreearisefromtheprovisionofEuroclear’sdailyservices(credit,liquid-ityandoperationalrisk).AnotherthreearerelatedtotheenvironmentinwhichEuroclearoperates(market,businessandstrategicrisk).Finally,onerisk(strategicprojectsrisk)isaddressedseparately,asitisparticularlyimportantfortheorganisation,andismanagedseparatelyfromday-to-dayservices.Thehigh-levelRiskRegisteriscomplementedbyamoredetaileddatabaseofrisks(includ-ingmitigatedandacceptedrisks).

• ERMprovidesaframeworktoallocaterolesandresponsibilitiesinthemanage-mentofrisks.ThekeyrisksdescribedintheRiskRegisterareownedbydivisionheads,whohavetheleadresponsibilityinmanagingtheserisks.Thisapproachenablestherisksrelatedtotheprovisionofourservicestobeidentifiedandthenmanagedoracceptedinaccordancewithourbusinessmodel.

• ThethirdcomponentofERMistheSystemofInternalControls.Euroclearhasamaturesystemofinternalcontrols,whichisdetailedonpages75-77.

OperationalriskEuroclearusesanOperationalRiskManagement(ORM)framework,whichformspartof,andisalignedwith,itsERMprogramme,mainlyusingthesameconcepts,toolsandsolutions.

Risk management


TheORMframeworkconsistsofseveninterconnectedpillars,whichareexplainedonpages75-77.

Together,theORMframeworkpillarsdetailhowoperationalrisksareidenti-fied,whoownsthem,andhowtheyaretobemitigated.TheORMframeworkalsodescribesallrelevantoperationalriskprocesses,theroleofpeoplewithinthem,andwhatinformationistobeprovidedtotakepropermanagementdecisions.Each

pillarhasbeenimplementedconsistentlyacrossthegroup.

SecurityandresilienceProtectingEuroclear’scriticalassetsandensuringahighlevelofresilience,inlinewithbusinessobjectives,istheprimefocusoftheSecurityandResilienceteam.

Information securityThecorporateobjectiveofthegroupsecu-rityteamistoensureanappropriatelevelof

protectionofEuroclear’sinformationandrelatedcriticalassets,inlinewiththeriskappetitedefinedbyseniormanagement.

Anindependentcomplianceauditwascon-ductedayearagousingISO17799:2005/27001:2006asareference.ThisallowedmanagementtomeasureprogressobjectivelywithregardstothematurityofEuroclear’sinformationsecuritycontrolenvironmentusingISOstandardsasareferencecontrolframework.Theauditconfirmedthatthe

60I Responsibility

group’sinformationsecuritymanagementsystemwaslargelyinplaceandisconsistentwiththeISOstandard.Italsoconcludedthat‘activitiestoimprovethestanceofinformationsecurityatEuroclearinthepastthreeyearshavebeenfruitful.’Afewpointsforimprovementwerenotedandarebeingimplementedfully.Inaddition,theinformationsecurityinternalcontrolsystemhasbeenincludedintheORMframework,allowingcompliancewiththerequirementsassociatedwithEuroclear’sadoptionoftheAMAunderBaselIIandfullalign-mentwithotherinternationallyrecognisedreferenceframeworkssuchasCobITandITIL.ContinuousmonitoringofemergingthreatsandevolvingrisksisalsoundertakenandallowsEurocleartoimprovethecontrolenvironmentcontinuously.

Business resilienceToensurecontinuousavailabilityofbusi-nesscriticalservices,theBusinessResilienceteam,withintheRiskManagementDivision,monitorstheimplementationoftechnicalandnon-technicalsolutions,en-compassingtechnology,buildingsandstaff.ThelastkeymilestonesintheresilienceandrecoverystrategyadoptedbytheBoardin2003wereachievedwhenathirddatacentrewaslaunchedin2007.Euroclearnowhasdatacentressufficientlydistancedfromeachothertosustainoperationsintheeventofaregional-scaledisaster.Theeffectivenessofdatacentresandrecoveryproceduresisassuredthroughthetransferofproductionactivitybetweensitesonamonthlybasis.

EuroclearBank,EuroclearFranceandEuroclearUK&Irelandareoperating

inadualofficestructure,guaranteeingtheavailabilityofcriticalexpertiseacrossseverallocations.Additionally,EuroclearBelgiumandEuroclearNederlandcanuseofficespaceinBrusselsasaremotebackup,shouldalocalisedeventdisruptaccesstotheirmainfacilities.

Allentitieshaveperformeddetailedbusinessimpactanalysestoidentifytheircriticalactivitiesandrecoverytimeobjec-tives.Businesscontinuityplanshavebeenharmonisedatcorporateanddepartmentallevelsthroughoutthegroup.Finally,eachelementofthestrategyisregularlymain-tainedandtested.Acomprehensivetrain-ingprogrammeisinplaceandcomplexityisprogressivelyintroducedinrehearsals,reflectingincreasedawarenessatorganisa-tionallevelandtheincreasedexperienceofthecrisismanagementteams.

Themainelementsofthebusinessresil-iencestrategyarereassessedeveryyearinresponsetoemergingorincreasingthreats.In2008,Euroclear’sbusinesscontinuityframeworkwillcontinuetodevelop,takingaccountofinternationalstandardsandbestpractice,includingtherecentlypublishedBritishStandard25999.

FinancialriskEuroclearmanagesitsfinancialrisksaccordingtostringentstandards.SuchrisksaremainlybornebytheICSD,EuroclearBank,initsroleassingle-purposesettle-mentbank.TheCSDsofthegrouphaveaverylowriskappetiteand,astheyofferonlysecuritiessettlementservicesincentralbankmoney,arelargelyinsulatedfromfinancialrisks.

Credit riskThespecificroleofEuroclearBankinfinancialmarketsoffersahighlevelofprotectionagainstcreditrisks.Asapuresettlementinstitution,itsmainexposuresareconcentratedwithinabusinessday.Suchashortdurationsignificantlylimitstheprobabilityofanunexpecteddefault,allthemoresoasEuroclearBank’scli-entbasemainlyconsistsofhighly-ratedbanks.Inaddition,EuroclearBankalmostexclusivelygrantscreditsecuredbyhighqualitycollateral,withabout99%ofitsclientcreditexposurebeingsecuredbycol-lateralpreferablyheldandpledgedwithintheParticipant’sEuroclearaccount.Othermeansofrecoursearealsopossibleinsomecircumstancessuchasstatutorylien,exter-nalcollateral,pledgedtimedeposits,reverserepos,lettersofcreditandguarantees.

Inaddition,EuroclearBankalsoincurstreasuryexposureresultingfromclients’end-of-daypositions.Suchpositionsareusuallyredepositedinthemarketwithhighqualitycounterparties.Wherepos-sible,reposareusedbutsomeexposureisunsecured.Therisksarelimitedbytheirshortduration(mainlyovernight),aswellaspolicycaps.Concentrationrisk,theriskthatEuroclearBankwouldbetoohighlyexposedtooneorafewcounterparties,isalsomonitoredandlimited.EuroclearBanktherebyalsocomplieswithBelgianbankingregulationsrelatingtolargeexposures.

Since1January2007,EuroclearBank,aswellasEuroclearSA/NVandEuroclearplc,hasappliedtheFoundationInternalRatingsBasedApproach(FIRBA)forcreditriskundertheBaselIIframework.The


ratingsofparticipantsandcounterpartiesresultingfromtheinternalratingmodel,whichhadtobeimplementedtocomplywiththeapproach’srequirements,areusedinthecalculationofregulatoryandeconomiccapital.TheyalsoofferEurocleartailor-madetoolstorefineitscreditriskmanagement.TheresultingregulatorycapitalforEuroclearBankatE115millionislessthanonetenthofthetotalavailablecapital,whichstandsatE1.47billion.

TheseconservativecreditpracticeshaveenabledEuroclearBanktoavoidanycreditlosstodate.

TheCSDsavoidprovidingcredittotheirparticipantsforsettlementpurposes.Theydonotengageinoperationswithcounter-parties,exceptfortheinvestmentoftheirownfunds.

Liquidity riskEuroclearhasastrongliquidityriskman-agementframeworkinplace,inlinewithinternationalstandards,wherebynetfund-ingrequirementsareadequatelymeasuredandmonitored.Theframeworkalsoallowsforahighlevelofpreparednesstocopewithunexpectedliquidityshocks.

LiquidityisnecessarytoallowEuroclearBanktoperformitssettlementoperationsefficiently.Duringtheday,EuroclearBankisanetliquidityprovidertothemarket,asitprocessespaymentsandsecuritiessettle-mentsbasedonclient’savailablefundsandcollateral.Tocopewithitsdailyliquidityneeds,EuroclearBankcanrelyuponawiderangeofliquiditysourcesinallitseligiblecurrencies,includingalargenetworkofcash

correspondentsandsettlementbanksanddirectaccesstoTARGET2.Furthermore,EuroclearBankhasanexcellentnameintheinter-bankmarketandhasaccesstoabroadrangeofestablishedcounterparties.Ithasfirst-andsecond-levelcontingencyliquiditysourcesinplaceforthemajorcurrencies.

End-of-dayclientbalancescanberedepositedintheinter-bankmarketforwhichtermlimitsaresetinordertomaintainliquidityavailability.

AsthecashlegoftheCSDs’securitiessettlementtakesplaceexclusivelyintheaccountsofacentralbank,theCSDsdonotincurliquidityriskoriginatingfromclientcashdeposits.Surpluscashinvest-mentsoftheCSDsarealwaysassessedagainstexpectedfuturecashflowsandcanbeinvestedonlyintermdeposits.

Market riskEuroclearBankdoesnotseekmarketrisk,butsomeriskarisesasaby-productoftheinvestmentofitscapital,businessearningsandhedgingstrategy.EuroclearBank’sinvestmentbookaimsatcapitalpreserva-tionand,assuch,isveryconservativelymanaged.Theapproachtothetreasurybookissimilarlyconservative.Tradesresultfromend-of-dayclientpositionsthatareredepositedinthemarket,mostlyonanovernightbasis.Thehedgingbookcompris-esmarketderivativestransactions,whicharedesignedtoinsulatefuturefinancialresultsfromadversemarketdevelopments.AsEuroclearBankdoesnothaveatradingbook,itisexemptedfromtherelevantcapitalprovisionsrequiredundertheBaselIICapitalAccord.

TheinterestrateandforeignexchangerisksincurredintheseactivitiesarelimitedbytheriskappetitesetbyEuroclearBank’sBoardofDirectors.Thisisdeterminedbythecapitalallocatedannuallyforsuchrisks(the‘uppertolerancelevel’).Thisisreinforcedbyinternalmarketlimits,suchasValueatRisk(VaR)andEarningsatRisk(EaR),andlegalorregulatorylimits.

TheCSDsareexposedtoaverylowlevelofinterestraterisk,resultingfromthein-vestmentsofproprietaryfunds(i.e.regula-toryandworkingcapital,surpluscash).Thedurationoftheseinvestmentsislimitedtoamaximumtermofsixmonths.Finally,EuroclearBelgium,EuroclearFranceandEuroclearNederlandfacelimitedrisksrelatedtodownwardmovementsinequityprices,whichmightaffecttheirexpectedfeeearningsonsecuritiesincustody.

62I

ParticipantswereabletocontinuetorelyonEuroclear’sservicesduringthesubprimelendingcrisis.Euroclearwasnotaffectedandcouldtherebyplayastabilisingrolebycontinuingtoofferuninterruptedcreditandliquiditytothemarkettoenablesecuritiestradestobesettledefficiently.ThreecomponentsofEuroclear’sbusinessmodelshieldedthecompanyandthemarketveryeffectivelyfromtherepercus-sionsofthecrisis:

• Thesecuritiessettlementinfrastructureishighlyresilient,andtheDVPmodelthatitoffersensuresthatitcontainsthesystemicrisksthatcouldresultfrompotentialsettlementfailures.Duringthesummer,Euroclearsafelysettledarecordnumberoftransactions,ofwhichthestrongestincreaseswereinEuroclearUK&Ireland.

• EuroclearBankisasinglepurposebankandthemarketisconfidentthatitwill

continuetosettlereliably.EuroclearBankdoesnotlendlongtermandholdsonlyhigh-qualityassets.Itselectsitsparticipantsandcounterpartiescarefully.

• EuroclearBankgrantsintra-daycredittoitsparticipantsagainstcollateral.Itthereforeholdsaverylargecollateralpool.Inaddition,itofferstripartycol-lateralmanagementservicestohelpmarketplayersoptimisetheuseoftheircollateralandtheiravailableliquidity.

Euroclear:astabilisingfactorduringthecreditcrisis


BaselII

Euroclear started to adopt the Belgian regulatory

requirements derived from the Basel II Accord in

January 2007. Since then, it has been using the

FIRBA for credit risk measurement under Pillar 1.

It intends to adopt the AMA for operational risk

measurement under Pillar 1 and to finalise the

implementation of Pillars 2 (supervisory review)

and 3 (market discipline) in 2008.

Pillar1:Operationalrisk:Advanced

MeasurementApproach

Euroclear Bank, Euroclear SA/NV and Euroclear

plc submitted their application to use the AMA

to calculate regulatory capital requirements for

operational risk in December 2006. Euroclear has

used the AMA in parallel with the BIA over the

course of 2007 and, conditional upon supervisory

approval, plans to adopt a hybrid approach at

all consolidated levels above Euroclear Bank, by

combining the AMA for Euroclear Bank with a

Standardised or Basic Indicator Approach for the

group’s other entities.

The AMA model was developed to be used both

for the determination of minimum operational risk

regulatory capital under Pillar 1 of Basel II, and for

the calculation of economic capital. For the regu-

latory capital, a confidence level of 99.9% is used,

while for the economic capital, a confidence level

of 99.98% is now used, consistent with Euroclear

Bank’s AA+ rating.

The building blocks of the model are frequency

and severity distributions, the parameters of

which are estimated or calculated using data

inputs that are compliant with the Basel II sound-

ness standards. They include the four required

elements: internal losses, relevant external losses,

scenarios, and business environment and internal

control factors.

Pillar2:Supervisoryreview

The Supervisory Review Process aims at ensuring

that institutions adequately understand and

manage their risks, including by way of capital

assessment and planning, in a continuous

dialogue with their supervisors. Under the Internal

Capital Adequacy Assessment Process (ICAAP),

institutions are expected to identify and quantify

the risks that they face and to relate this to the

level of capital needed to fulfil their plans. In

contrast, under the Supervisory Review Evaluation

Process, the evaluation of risks is carried out by

the institutions’ supervisors. Supervisors also

assess the adequacy of the ICAAP. If the ICAAP

is deemed unsatisfactory, supervisors might

request an addition to Pillar 1 regulatory capital

requirements.

Euroclear has progressed well in implementing

the organisational and methodological changes

necessary to formalise the ICAAP, with the use of

economic capital models and the formalisation of

capital planning and strategic risk management.

In addition, Euroclear will deliver its first stand-

ardised report of risks not covered under Pillar 1

(interest rate risk in the banking book, liquidity

risk, and concentration risk on specific sectors or

geographic areas) to the regulators in the first

half of 2008.

Pillar�:Marketdiscipline

Pillar 3 relates to the disclosure of information

by supervised institutions (at the highest consoli-

dated level), with a view to encourage better risk

management through the market discipline of

this transparency. Information will be disclosed

about the structure of the institutions’ capital, as

well as the capital requirements associated with

the different exposures incurred. Alongside such

quantitative information, institutions will describe

their various risk management processes and the

methodologies applied.

The first disclosure under Pillar 3 for Euroclear plc

will be published in Q2 2008 on www.euroclear.com.

64I Responsibility

1 Arm’s length definition according to the OECD guidelines

Inter-company Transaction Policy audit

TheEurocleargrouphascommitteditselftothepolicyofnocross-subsidybetweenthegroupICSDandCSDs.

Everyyear,werequestanindependentaudi-tor,PricewaterhouseCoopers,toconductanauditandprovideanattestationtotheEuroclearBoard.TheconclusionsofthisreportarepublishedintheEuroclearannualreport.TheaudittakestheformofayearlyconfirmationthattheEuroclearInter-com-panyTransactionPolicycomplieswiththeOECDTransferPricingGuidelinesandthattheseguidelinesareappliedbytheEurocleargroup.Suchanattestationhasbeeninclud-edintheannualreportsince2003.

Acopyoftheindependentauditor’sattesta-tionfor2007isincludedontheoppositepage.TherelatedEuroclearmanagementassertionstatementregardingInter-com-panyTransactionPolicyprovidedtotheindependentauditorwithrespectto2007canbefoundbelow.

Euroclearremainstheonlysettlementserviceproviderfurnishingthistypeofindependentthird-partyverification.

Management’sassertionstatementEuroclearSA/NVanditssubsidiariesmain-taineffectivecontrolstocomplywiththeEuroclearInter-companyTransactionPolicy(the‘Policy’).Thecontrolsincludethoseprocessesandproceduresthat(i)pertaintothemaintenanceofrecordsthat,inreason-abledetail,accuratelyandfairlyreflecttheinter-companytransactionsandarrange-ments(ii)providereasonableassurancethattransactionsarerecordedasnecessarytocomplywiththePolicy,andthosetransac-tionsandarrangementsarebeingmadeonlyinaccordancewithauthorisationsofmanagementanddirectorsofEuroclearSA/NVanditssubsidiaries.Oursystemcontainsself-monitoringmechanisms,andactionsaretakentocorrectdeficienciesastheyareidentified.

ThePolicy,whichhasbeenestablishedbyManagementandapprovedbytheBoardsofDirectorsofeachoftheEuroclearenti-ties,complieswiththeOECDTransferPricingGuidelinesofJuly1995,includingsubsequentamendments.

ThePolicyisdesignedtoensurethatforanygoodsorserviceswhichareprovidedbetweenentities,agreementsareinplacefor‘atarm’slength’1remunerationbetweenthoseentities.

ManagementisresponsibleforestablishingandmaintainingprocessesandprocedurestoensurecompliancewiththePolicy.

ManagementhasassessedtheapplicationoftheInter-companyTransactionPolicyfortheperiod1January2007throughto31December2007.

Basedonourassessment,andtakingintoaccounttheaboveassertions,EuroclearSA/NVbelievesthat,fortheperiod1January2007through31December2007,theInter-companyTransactionPolicyhasbeeninaccordancewiththeOECDGuidelinesandwasappliedeffectivelyamongstEuroclearSA/NVanditssubsidiaries.

26March2008

Pierre FrancotteCEO of Euroclear SA/NV


ReportoftheindependentauditorregardingtheInter-companyTransactionPolicyofEuroclearSA/NVfortheyearended�1December2007

UponrequestfromEuroclearSA/NV’sBoard,inlightoftheirstatedobjectivetoavoidcross-subsidybetweentheICSDandtheCSDsofthegroup,wehaveexaminedEuroclearSA/NV’sManagementCommittee’sassertionsontheinter-companytransactions,statingthat:

• theEuroclearInter-companyTransactionPolicy(‘Policy’)complieswiththeOECDTransferPricingGuidelinesofJuly1995,includingsubsequentamendments;and

• effectiveinternalcontrolovercompliancewiththePolicyhasbeenmaintainedduringtheyearending31December2007.

EuroclearSA/NV’sManagementCommitteeisresponsiblefortheassertions.Ourresponsibilityistoexpressanopinionontheassertionsbasedonourexamination.

OurexaminationwasconductedinaccordancewithattestationstandardsestablishedbytheAmericanInstituteofCertifiedPublicAccountants(SSAENo.10)and,accordingly,includedexamining,onatestbasis,evidencesupportingmanagement’sassertionsandperformingsuchotherproceduresasweconsiderednecessaryinthecircumstances.Webelievethatourexaminationprovidesareasonablebasisforouropinion.

Inouropinion,basedontheOECDTransferPricingGuidelines,themanagement’sassertionsasreferredtoabovearefairlystatedinallmaterialrespects.

26 March 2008PricewaterhouseCoopers Reviseurs d’Entreprises sccrlRepresented by

R. PeircePartner

66I Responsibility

Corporate governance

What does corporate governance mean to Euroclear?Euroclearbelievesthatsoundcorporategovernanceenhancesthegroup’sabilitytopromotethesuccessofthecompanyforthebenefitofitsshareholders.TheBoardofEuroclearplchasendorsedusergovern-anceasasolidandefficientgovernanceframework,whichensuresthattheBoardandmanagementoperatewithintheirrolesandresponsibilitiesdeliveringstrongleadershipinpursuitofthegroup’spurpose.TheBoardofEuroclearplcbelievesthattheenhancementofthegroup’sfranchisethroughefficientandcompetitiveproductandservicedeliverytoclients,togetherwiththecontinuedincreaseinthelevelofdividendspaidtoshareholders,reflectsthevalueofusergovernancewithinEuroclear.

EuroclearplcandEuroclearSA/NVcontinuetheirvoluntaryapplicationoftheUKCombinedCodeonCorporateGovernance(the‘Code’).Thispartoftheannualreportdemonstrateshow,during2007,EuroclearhasappliedtheprinciplessetoutinSection1oftheCodesoastodeliversound,strategicleadershipandcontrol.Infurtheranceofitscommitmenttosoundgovernance,EuroclearSA/NVseekstocomply,inadditiontotheCode,withtheprinciplesofgoodcorporategovernancedefinedbytheBelgianBanking,FinanceandInsuranceCommission(CBFA).Theseprinciplesreflectapplicableregula-tions,recommendationsandbestpracticeoncorporategovernanceandarefullyinlinewiththephilosophyoftheCode.

Exceptwherementionedbelow,EuroclearplcandEuroclearSA/NVcomplied

throughout2007withtheprovisionsoftheCode.

Boardofdirectors

Who is on our Boards?ThedirectionoftheEurocleargroupisdividedbetweentheBoardsofEuroclearplcandEuroclearSA/NV(the‘Boards’).ThedivisionofresponsibilitiesbetweenthetwoBoardsissetoutbelow.BothBoardshavethesamemembership,consistingof22non-executivedirectors,theChairman,SirNigelWicksandtheDeputyChairman,Mr.Jean-JacquesVerdickt.Allbutthreeofthe24directorsareseniorexecutivesfromfirmswhichareacross-sectionofusersofEuroclearservicesandshareholdersofthecompany.TheirknowledgeandexperienceismostvaluableforthedevelopmentoftheEuroclearstrategyandthemonitor-ingofitsimplementation.MembersoftheManagementCommitteeofEuroclearSA/NVarenotBoarddirectors.However,theyparticipateinallBoardmeetingsandhavefrequentcontactwithBoardmem-bersin-betweenmeetings.TheroleoftheManagementCommitteeisdescribedbelow.

TheBoardsconsiderallthedirectorstobeindependentincharacterandjudgementwithinthemeaningsetoutintheCode,havingexaminedeachdirectoragainsttheindependencecriteriadescribedintheCode.Inaddition,giventhatmostofthedirectorsaredrawnfromusersofthegroup’sservices,theBoardshaveagreedandappliedobjectiveguidelinestoevaluatewhetherthebusinessrelationshipbetweenEuroclearandtherelevantusercompa-niescouldinfluenceadirectorincarrying

outtheirduties,tothedetrimentofthecompany.Mr.FrankJ.DeCongelioisconsideredbytheBoardstobeindepend-entnotwithstandinghistenureofmorethannineyearsonaEuroclearBoard,duetothefactthatduringthefirstfiveyearsofhistenurethecompanydidnotoperatetheEuroclearSystem,andasaresulttheBoardhadsubstantiallydifferentresponsibilitiesandalimitedrelationshipwithmanagement.

SinceAugust2006,SirNigelWickshasbeenChairmanoftheBoards.InJuly2007,SirNigelwasappointedasamemberoftheJerseyFinancialServicesCommission,astatutorybodycorporatewhichisrespon-siblefortheregulationandsupervisionofthefinancialservicesindustryontheislandofJersey.ThisnominationwasapprovedinadvancebytheBoards,havingassessedtheimpactofsuchamembershipagainsttheresponsibilitiesandavailabilityofSirNigelWicksinEuroclear.SirNigelmeetstheindependencecriteriasetoutintheCode.

Mr.Jean-JacquesVerdicktwasappointedDeputyChairmanoftheBoardson29October2007uponarecommendationoftheNominationsandRemunerationCommittee.Thisfollowedareviewofsev-eralpossiblecandidatesandanassessmentoftheirknowledgeofEuroclear’sbusinessandthemarketinwhichitoperates,back-ground,seniorityandpreviousexperience,andoverallreadinesstofulfilthefunction.Asindependentnon-executivedirectorofEuroclearBankSA/NV,aBelgiansubsidiaryofEuroclearSA/NV,sinceJanuary2005,Mr.Jean-JacquesVerdicktalreadyhasanin-depthknowledgeofthebusinessactivitiesandthegovernanceofEuroclear.Mr.Jean-


JacquesVerdicktmeetstheindependencecriteriasetoutintheCode.TheprimaryroleofMr.Jean-JacquesVerdickt,asDeputyChairman,istoactintheplaceoftheChairman,shouldtheChairmanbecomeincapacitatedorotherwisenolongerabletocarryouthisBoardresponsibilities,andtoassisttheChairmaninperforminghisrole,particularlywithregardtogovernanceissues.Mr.Jean-JacquesVerdicktexercisesothernon-executivedirectorshipmandatesoutsidetheEurocleargroup,thelistofwhichisavailableonwww.euroclear.com.

TheBoardhasdesignatedthechairmanoftheNominationsandRemunerationCommitteeastheSeniorIndependentDirector,exofficio.ThepositioniscurrentlyheldbyMr.MarkS.Garvin.GiventhechannelsofcommunicationbetweenEuroclearanditsshareholders(asdescribedonpage74),theroleoftheSeniorIndependentDirectorinEuroclearisprincipallytobeavailabletofellownon-executivedirectors,eitherindividually

orcollectively,shouldtheywishtodiscussmattersofconcerninaforumthatdoesnotincludethemanagementofthegrouportheChairman,andtoleadtheBoardintheassessmentoftheChairman.

MembersoftheBoardsareappointedbytheGeneralMeetingofShareholdersofeachcompanyforaninitialtermofnomorethantwoyears.HalfoftheBoardsstandforre-electioneachyearandnewdirectorsaresubjecttoelectionatthefirstopportunityfollowingappointment.TheNominationsandRemunerationCommitteemakesrecommendationstoeachBoardfortheappointmentandrenewalornon-renewalofBoardmembers.TheBoardsthensubmittheCommittee’sproposalstotheshareholders.Thisproce-duredoesnotapplytodirectorsnominatedbythe‘S’shareholders,who,inaccordancewiththerightssetoutintheArticlesofAssociationofEuroclearplc,currentlyhavetherighttonominatethreedirectorsforappointmenttothatBoard.Uponappoint-

ment,Boardmembersreceivealetterofappointmentwhichoutlinestheirresponsi-bilitiesandthetermsuponwhichtheyareappointedtotheBoard,includingthetimetheyarerequiredtoallocatetofulfiltheirroleinEuroclearplcandEuroclearSA/NV.

AllrecommendationsoftheNominationsandRemunerationCommitteetotheBoardsaremadeonthebasisofadirector’spotentialcontributionintermsofknowl-edge,experienceandskill,andinaccord-ancewiththeneedsoftheBoardatthetimeofthenomination.Inaddition,theNominationsandRemunerationCommitteeverifiesthateachBoardasawholepossessesthenecessarybalanceofskillsandexperi-encetosetthegeneralpolicyandstrategyofEuroclearplcandEuroclearSA/NVandthegroupgenerally,andtoproperlysupervisemanagementintheimplementationofsuchpolicyandstrategy.

In2007,theBoardhasendorsedapolicysettingoutselectioncriteriaforBoard

68I Responsibility

memberscoveringtheintegrity,availability,experienceandseniorityofdirectorsaswellastheirknowledgeofthemarketsandofthegroup’scorebusinesslines.Alsotakenintoconsiderationiswhetherthecandidateisdrawnfromtheshareholdersand/orsignifi-cantusersinEuroclear.TheNominationsandRemunerationCommitteeassessesthedirectorcandidateagainsttheselectioncrite-riasetoutinthispolicy.AsthedirectorsaredrawnfromusersofEuroclearservices,whoaregenerallywellknownintheindustry,theBoarddoesnotrelyonanexternalsearchagencyoropenadvertisingintheappoint-mentofdirectors.

TheNominationsandRemunerationCommitteereportstotheBoardonthecom-positionoftheBoardsandtheircommitteesonanannualbasistoensurethattheyremainappropriatetopromotetheeffectiveleader-shipofeachcompanyandtheEurocleargroup,inaccordancewiththispolicy.

In2007,theNominationsandRemunera-tionCommitteeundertookareviewoftheappropriatenessofthecurrentcommittees’structure,roleandcompositiontakingintoaccountthecurrentbusinessneedsofthegroupandtherolefulfilledbyeachoftheexistingcommittees.Followingthatreview,theBoardapprovednewappointmentstocommitteesoftheBoards,disbandedtheEx-ecutiveCommitteeofEuroclearplcandap-provedthattheDeputyChairmanbecomesanexofficiomemberofallcommitteesexcepttheJointAuditCommittee,which,he,liketheChairman,attendsoninvitation.

Boardcompositionandbalance,anddirectorperformance,wereanalysedbythe

NominationsandRemunerationCommitteeatitsmeetingwherethelistofcandidatesproposedforre-electionattheAnnualGen-eralmeetingwasconsidered.

Uponappointment,eachdirectorisofferedaninductionintoEurocleardesignedtodevelophis/herknowledgeandunderstand-ingofallimportantelementsofthegroup’sbusinessandtheresponsibilitiesoftheroleasaBoarddirector.Duringtheirmandate,directorsattendongoingtrainingsonmat-tersrelevantandmaterialtotheirdirector-shipsandcommitteemandates,asnecessaryorrequestedfromtimetotime.Inaddition,workshopsarearrangedfortheBoardsontopicsofparticularrelevanceorimportance.In2007,theBoardsdecidedtodeviseatrainingplaneachyearonthebasisoftheresultsofsuchBoardselfassessmentandtheadviceoftheChairman,CompanySecretaryandGeneralCounselongeneraltrainingneeds.

What are the Boards’ responsibilities and how do they meet them?TheBoardshaveseparateanddistinctresponsibilitiesasdescribedindetailbelow.BothBoardsareassistedbytheircommitteesinfulfillingtheirdutiesandresponsibilities.Theworkingsofthecommitteesaresetoutbelowonpage70.

TheBoardofEuroclearplcisresponsibleforallshareholdermatters,settingvaluesandstandardsingovernancemattersandensuringthatnecessaryfinancialresourcesareinplacetomeetstrategicaims.ThisBoardmetseventimesduring2007.AtfourofthesemeetingsitreceivedanupdatefromthegroupCEOonallmaterialmattersaffectingthegroup

anditsperformanceaswellasareviewofthegroup’sfinancialperformancetodate.TheBoardmeetingsalsocoveredvariousshare-holdermatters,includingthereviewandapprovaloftheannualreportandaccountsandconsiderationofthelevelofdividends.

Inadditiontothosefourmeetings,theEuroclearplcBoardmetthreetimesjointlywiththeEuroclearSA/NVBoardduring2007:onceinordertodedicateafulldaytoEuroclearstrategyinidentifyingpoten-tialstrategicopportunitiesandthreatsforEurocleararisingoutofmarkettrendsanddevelopments,oncetofollowuponthediscussionsheldduringthestrategymeetingandoncetoapprovetheappointmentoftheDeputyChairman.

In2008,theBoardofEuroclearplcwillconsiderandexpectstoproposeamend-mentstoitsArticlesofAssociationtokeepitcurrentwiththenewUKCompaniesAct2006.

TheprincipalresponsibilitiesoftheBoardofEuroclearSA/NVaresettinggroupstrategyandoverseeingitsimplementation,ensuringeffectivecontrolsareinplacethatenablesrisktobemanaged,andsettingtheframe-workforgrouppolicies.

In2007,theBoardofEuroclearSA/NVhadsixordinarymeetingsandtwoextraordinarymeetings.ThreeofthosemeetingswerejointlyheldwiththeEuroclearplcBoard(asmentionedabove).Ateachoftheothermeetings,theBoardhadin-depthdiscus-sionsonstrategicdevelopmentswithinthegroup,andexternaldevelopmentswithanimpactonEuroclear.


TheexerciseoftheEuroclearSA/NVBoard’soversightandcontrolfunctionwasalsoevidentthroughouttheBoardmeetingsin2007.Inadditiontotheupdateonfinancialresultsreceivedateachmeeting,theBoardreviewedandapprovedthebudgetpresentedbyManagement.

TheBoardofEuroclearSA/NVhasseveraltoolstoensurerisksareproperlyman-agedandassessed.ItisassistedbytheRiskPolicyCommittee,whichreviewsgroupriskpoliciesthoroughly,andbytheAuditCommittee,whichcloselymonitorsthegroup’sinternalfinancialcontrolsandtheinternalcontrolandriskmanagementprocessesaswellasitscompliancefunc-tion.TheBoarditselfundertakesanannualreviewofthesystemofinternalcontrolsasreportedonpage75.

InadditiontotheinformationreceivedaspartoftheBoardmeetingprocess,ManagementpreparesquarterlyreportstotheBoardsprovidingupdatesonfinancialandoperationalperformanceofeachofthe(I)CSDsandtheworkingsoftheMarketAdvisoryCommittees.ThosequarterlyreportsaresenttoallBoardmembersatthebeginningofeachquarter,whereupontheBoardisgiventheopportunitytoraiseques-tionsatthenextfollowingBoardmeeting.

TheChairmanisinregularcontactwiththemembersofBoardsandmeetseachdirectorindividuallyoutsideofboardmeetingstodiscussEuroclearmatters.

During2007,theBoardscontinuedtheirongoingevaluationprocesstoassessperformanceandidentifyareasinwhich

itspolicies,processesandeffectivenessshouldbeenhanced.TheChairman,theManagementCommitteeandtheCEOwereeachassessedbytheBoard.ThisannualreviewwasbasedonadetailedquestionnairecompletedbyeachmemberoftheBoards.Ananalysisoftheresponsestothequestion-nairewasreviewedbytheNominationsandRemunerationCommittee,theresultsofwhichwerereportedtotheBoards.Furthertotheserecommendations,theBoardsagreedonstepstofurtherimproveitseffec-tivenesswhereappropriateaswellasaplanongeneraltrainingneeds.

Management

How does management support the workings of the Board?TheBoardofEuroclearSA/NVhasestablishedaManagementCommitteeanddelegatedtoitresponsibilityformanagingthebusinessofEuroclearwithinthestrategyandgeneralpolicydecidedbytheBoardandtoimplementsuchstrategyandgeneralpolicy.Itiscomprisedofsevenmembersincludingitschairman,Mr.PierreFrancottewhoistheCEOofthecompany.

TheManagementCommitteereportsregularlytotheBoardondecisionstakenpursuanttoitsdelegatedpowers.UnderthedirectionoftheChairman,theCommitteeensuresrelevantitemsarepresentedtotheBoardinafullandthoroughfashion,takingresponsibilityforthepreparationoftheinformationreceivedbytheBoard.TheChairmanoftheBoardseekstopromoteef-fectiveandopencommunicationbothinsideandoutsidetheboardroombetweenthemembersoftheBoardandtheManagement

Committee.HeprovidessupportandadvicetotheManagementCommittee,whilerespectingitsexecutiveresponsibility,andrepresentstheinterestsoftheBoardbetweenBoardmeetingsasacomplementtomanagement’srelationshipwithothernon-executivedirectors.TheCEOactsasliaisonbetweenseniormanagersandtheChairmanandotherBoardmembersandcoordinatesinteractionbetweenthem.

ToaidtheBoardinsettingappropriatestrategicobjectives,theManagementCommitteemonitorstheexternalenviron-ment(includingthecompetitiveclimate,economicandindustrytrends)andmakesrecommendationstotheBoardinordertoidentifycurrentandemergingissuesthatmayaffectthegroupaswellasfuturegrowthopportunities.TheCEOworkstogetherwiththeChairmantoformulatestrategicproposalsforconsiderationbytheBoard.Inthiscontext,theManagementCommitteerecommendstotheBoardanannualplanandbudgetaddressinghowtoimplementcorporatestrategyandlong-termgoals,andpoliciesdesignedtoestablishclearriskmanagementobjectivesforthecompany.OncetheannualplanhasbeenapprovedbytheBoard,theManagementCommitteemanagestheday-to-dayoperationsbydecid-ingonorguidingkeycoursesofactioninoperationsbystaffandensuringtheefficientmanagementofhuman,financialandphysi-calresources.

In2007,theManagementCommitteeper-formedanannualselfassessmentwithaviewtoidentifyingwaystodevelopitseffective-nessandagreedonactionpointsarisingoutoftheresultsofthisassessment.

70I Responsibility

BoardCommittees

What is the composition and role of the Board Committees?InorderfortheBoardsofEuroclearplcandEuroclearSA/NVtofulfiltheirresponsibili-tiesefficiently,committeeswithdifferentexpertiseandpowershavebeenputinplace.Theirtermsofreference,whichincludedetailsoftheroleandresponsibilitiesofeachofthesecommittees,canbefoundonwww.euroclear.com.

EuroclearplchasthreeBoardcommittees–theNominationsandRemunerationCommittee,theAuditCommitteeandtheOperationsCommittee.TheBoardofEuroclearSA/NVhasestablishedsevencommittees–theManagementCommittee,theExecutiveCommitteewhichistoberenamedtheInterimBusinessCommittee,theNominationsandRemunerationCommittee,theAuditCommittee,theStrategyCommittee,theRiskPolicyCommitteeandtheBusinessModelImplementationCommittee.AllthesecommitteesareadvisorycommitteesexceptfortheExecutiveCommitteeandtheManagementCommittee.

Fromtotimetotime,theBoardsofEuroclearplcandEuroclearSA/NValsoestablishadhoccommitteesdesignedtosupporttheBoardinrelationtospecificprojects.

ThecommitteesmeetonaregularbasisandeachcommitteechairpersonreportsattheBoardmeetingimmediatelyfollowingacommitteemeeting.Thetableonpage73setsoutthemembershipofeachcommit-

teetogetherwithdetailsofthenumberof,andindividualattendanceat,committeemeetings,otherthantheManagementCommitteemeetingswhichareweekly.

IncommonwiththeBoard,eachofthecom-mitteesmayrequestanyinformationfrommanagementnecessarytodischargetheirfunctionsandmay,whereconsideredneces-sary,seekindependentadviceandcounsel.

TheChairmanandtheDeputyChairmanaremembersorex-officiomembersofeachcommittee(dependingonthecommittees’termsofreference),excepttheAuditCom-mittees,whichtheyattendoninvitation.

EuroclearplcandEuroclearSA/NVjointcommittees

TheAudit CommitteesofEuroclearplcandEuroclearSA/NV,chairedbyMr.FrankJ.DeCongelio,metjointlysixtimesduring2007.AllmembersoftheAuditCommitteesareindependentnon-executivedirectorsandtheBoardsconsiderthatthereissufficientrecentandrelevantfinancialexperiencewithintheseCommitteesforthemproperlytodischargetheirfunctions.Theexternalauditors’leadpartner,theheadofinternalaudit,togetherwiththegroupCEO,ChiefFinancialOfficer,andGeneralCounsel,aswellastheBoardChairmanandDeputyChairman,attendedeachmeetingattheinvitationoftheCommitteechair-men.TheCommitteesmetonceduring2007withtheinternalauditorandexternalauditorwithoutmanagementbeingpresent.

TheAuditCommittees’tasksaresetoutindetailintheirtermsofreference,which

havebeenapprovedbytheBoards,andcoverthoseitemsenvisagedbytheCode.TheCommitteeshaveanagreedreportingcalendartoensuretheyproperlydischargetheirresponsibilitiesandcoverallmatterswithintheirpurview.

Inlinewiththereportingcalendar,during2007,theCommitteesreceivedstand-ingquarterlyreportsonhighriskcontrolissues,legalandcompliancematters,theinternalauditstatusofthemajorbusinessmodelprojectsandprogressoftheannualinternalauditplan.AteachmeetingtheCommitteesreceivedanupdateonunau-ditedfinancialresultstodate.

TheCommitteesreviewedandmaderecommendationstotheirrespectiveBoardsonadhocfinancialmattersarisingthrough-outtheyear.TheexternalauditorreportedateachCommitteemeetingonrelevantaccountingandregulatoryissues.

TheCommitteesconductedtheirannualin-depthreviewoftheeffectivenessofthesystemofinternalcontrol,afulldescriptionofwhichissetoutonpage75.

During2007,theheadofinternalaudit,inaccordancewiththeEurocleargrouppolicysettingoutstepstoensuretheexternalaudi-tor’sindependenceandobjectivityaremain-tained,reportedtotheAuditCommitteeswithanoverviewofallfeespaidtotheexter-nalauditorforthegroup,togetherwithalistofallnon-coreauditservicesperformedbytheexternalauditor.Basedonthisassess-ment,theexternalauditor’scompliancewiththeindependencerequirementwasconfirmedbytheCommittees.


Furthermore,in2007,theAuditCommitteesundertookaformalassessmentoftheexternalauditorforallEuroclearentities.ThisassessmentwascarriedoutbycompletionofadetailedquestionnairebythemembersoftheAuditCommitteeandtheManagementCommitteeofeachEuroclearentity.TheresultswerecollatedalongwithasynopsisandpresentedfirsttotheAuditCommitteeofeachentityfordiscussion,andthentotheAuditCommitteesofEuroclearplcandEuroclearSA/NV.Thisassessmentwillbeundertakenonanannualbasis.

TheAuditCommitteeofEuroclearplcmetalonethreeadditionaltimesduring2007toreviewunauditedfinancialresultspriortothesebeingpostedontheBulletinBoard.

TheAuditCommitteeofEuroclearSA/NVmetaloneoncein2007todiscusstheUKFinancialServicesAuthority(FSA)riskassessmentofEuroclearUK&IrelandLimited,asrecommendedbytheFSA.

TheCommitteesundertooktheirannualeffectivenessreview,theresultsofwhichdemonstratethattheCommitteesarefunctioningwell.TheCommitteeshaveagreedcertainfollow-uppointsarisingoutoftheassessmentaswellasaplantoaddressthesepointsduring2008.

TheNominations and Remuneration CommitteesofEuroclearplcandEuroclearSA/NVarechairedbyMr.MarkS.Garvin.In2007,theCommitteesmetseventimesinajointsession.

InadditiontotheirannualreviewofcompliancewiththeCombinedCode,theCommitteesreviewedandproposedtotheBoardspersonsforelectionasdirectorsasvacanciesarosethroughouttheyear.TheCommitteesreviewedandagreedonanamendedtextfortheletterofappointmentofBoardmembersinlinewithbestpracticeingoodgovernance.

TheCommitteesfollowedupondiscus-sionsheldlastyearontheremunerationofBoardmembers.Subsequently,theCommitteesrecommendedforadoptionbytheBoardsanewremunerationpolicyforallitsuser-affiliatednon-executivedirectorsthatisinlinewiththeirroleandrespon-sibilitiesaswellaswithgoodpractice.

Furthermore,during2007,inordertocomplywithrecentBelgianregula-toryrequirementsongoodgovernance,theNominationsandRemunerationCommitteeofEuroclearSA/NVrecom-mendedtotheBoardtheadoptionofdif-ferentmeasuresoncorporategovernance.Amongitsnewobligationsoncorporategovernance,EuroclearSA/NVisrequiredtoprepareagovernancememorandumde-scribingitsshareholdingstructure,policiesonthecompositionofboardandmanage-mentorgans,itsmanagementstructureandcorporatepolicies,allassessedagainsttherecommendationssetoutintheBelgianregulation.ThisgovernancememorandumissubjecttoapprovalbytheCBFAin2008.TheNominationsandRemunerationCommitteeofEuroclearSA/NVoversawthepreparationofthisdocumentthrough-outtheyear.TheNominationsandRemunerationCommitteesalsoadopteda

policyonthecompositionoftheBoardandBoardcommitteesandreviewedthestruc-ture,roleandcompositionoftheBoardanditscommittees,asexplainedabove.TheCommitteesreviewedthetermsofreferenceoftheManagementCommittee.Theyalsoreviewed,asexplainedonpage74,thecur-rentlinesofcommunicationbetweentheBoardandtheshareholders.

AnevaluationoftheeffectivenessoftheCommitteesundertakenduring2007,andtoberepeatedeveryyear,foundthattheCommitteesarefunctioningwellandinaccordancewiththeirtermsofreferenceandbestpracticeguidelines.

EuroclearplcCommittee

TheOperations CommitteeofEuroclearplc,chairedbySirNigelWicks,whichisresponsibleforhandlingoperationalandadministrativemattersarisingbetweenBoardmeetings,metfivetimesduringtheyear,andoneachoccasionitapproved,interalia,theopeningofanewBulletinBoardsession.

EuroclearSA/NVCommittees

TheStrategy Committee ofEuroclearSA/NV,chairedbySirNigelWicks,assistsinpreparingastrategicagendafortheBoardandensuringthattheBoardisgiventheinformationnecessaryformakingstrategicdecisions.TheStrategyCommitteemetoncein2007andpreparedcertainstrategicitemsfordiscussionbythewholeBoardincludinganagendaforthefull-daystrategyBoardmeetingheldinearly2007.

72I Responsibility

TheRisk Policy CommitteeofEuroclearSA/NV,whichischairedbyMr.RichardC.S.Evans,providesadvicetotheBoardontheriskpoliciesofthegroup,reviewsmajorriskissuesfacedbyEuroclearandadvisesontheirmitigation.Severalmem-bersoftheCommitteeareexpertsintheareaofriskmanagement.

TheCommitteemetfourtimesduring2007.ItrecommendedtotheBoardforapprovaltheharmonisationoftheadmissioncriteriaoftheESESCSDsaswellastheongoingmonitoringofadherencetothecriteria,assetoutintheOperationalRiskBoardPolicy.ItalsoreviewedtheAnti-MoneyLaunderingBoardPolicyinfurtheranceoftheimplementationoftheThirdEuropeanDirective.TheCommitteereceivesaquar-terlyreportonbankingriskswhichincludesperiodicreportingrequiredbyanumberoftheriskpoliciesinplaceinthegroup.TheCommitteealsoreviewedandprovidedadvicetotheboardsofsubsidiarycompaniesonspecificriskissuesandrecommendedthe2007uppertolerancelevelstothoseboardsforapproval.TheRiskPolicyCommitteealsohaddiscussionsaboutthefinancialmarketdisruptionslinkedtothesubprimecrisisandtheirimpactonEuroclear.

TheRiskPolicyCommitteehostsanannualriskforumwhereleadingindustryriskexpertsareinvitedtoexchangeideasonrisktopicsrelevanttotheEurocleargroup.In2007,theforumwasdevotedtoanin-depthdiscussiononenterpriseriskmanagement.

TheRiskPolicyCommitteeundertookitsfirstannualselfassessmentin2007.

AdetailedquestionnairewascompletedbyeachCommitteemember.TheCommitteereviewedtheresponsesanddiscussedfollow-upactionsaswellasaCommitteetrainingplanforthecomingyear.

MeetingsoftheBusiness Model Implementation CommitteeofEuroclearSA/NVareopentoalldirectors(andgener-allyattendedbyalmostall).TheCommitteeischairedbySirNigelWicks.Itmonitorstheprogresstowardsimplementationofthevariousprogrammesformingthebusi-nessmodel.

TheCommitteemetfourtimesin2007andoneachoccasionwasgivenadetailedupdateontheprogressofthemainpro-grammesthatarepartoftheimplementa-tionofthebusinessmodel.TheCommitteealsoreceivedaquarterlyscorecardforeachoftheprogrammes.Thescorecardassessestheinternalcontrolsystemofthepro-grammes,inordertoascertainwhethertheprogrammescopeislikelytobedeliveredwithintheestablishedqualityinstructions,deadlinesandbudgetswithaknownandacceptedriskprofile.TheCommitteewaskeptinformed,bothaspartofitsmeet-ingsandbywayofcommunicationsfrommanagementoutsideofthemeetingcycles,oftheprogressoftheESESimplementationduring2007,aswellastheotherphasesoftheprogramme.

In2007,theBusinessModelImplementa-tionCommitteedecidedtoperformanannualeffectivenessreviewconsistingoftheassessmentoftheCommittee’sownper-formanceagainstadocumentedbenchmarkthatreflectstheobjectivesoftheCommit-

teeandrelevantgoodpracticeandguid-ance.Theresultswillbeassessedin2008.

TheExecutive Committee (toberenamedtheInterimBusinessCommittee)ofEuro-clearSA/NVischairedbytheChairmanoftheBoardandhasasmemberstheDeputyChairmanandelevenofthecompany’snon-executivedirectorsplusthemembersoftheManagementCommittee.

TheCommitteemettwicein2007.ItconsideredgeneralupdatesfromtheCEO.Italsoapprovedseniormanagementcom-pensation,reviewedpensionfundmatters,anddealtwithvariousadministrativebusi-nessmatters.TheExecutiveCommitteehasestablishedasub-committee,theExecutiveCompensationCommittee,whichmakesrecommendationstotheExecutiveCommitteeregardingremunerationandothertermsofemploymentformembersoftheManagementCommittee,aswellasremunerationpoliciesforEuroclearemployeesingeneral.

MarketAdvisoryCommittees

TheEurocleargrouphasestablishedfiveusercommitteesknownasMarket Advisory Committees (MACs)forBelgiumandTheNetherlandsjointly,France,Ireland,theUnitedKingdom,aswellasaCross-borderMarketAdvisoryCommittee.ThesecommitteesarenotBoardcommitteesandtheirmembersarenotdirectorsofEuroclear.TheMACsareaprimarysourceoffeedbackandinteractionbetweentheusercommunityandEuroclearmanagementonsignificantmattersaffect-ingtheirrespectivemarkets.


2

2

2

2

2

2

Euroclearplc&EuroclearSA/NVdirectors’attendance20071

Board Audit Business Executive Nominations& Operations RiskPolicy Strategy Committee Model Committee Remuneration Committee Committee Committee4 Implementation Committee Committee

Sir Nigel Wicks 14 (15) 10 4 (4) 2 (2) 6 (7) 5 (5) 3 (5) 1 (1)

Jean-Jacques Verdickt 2 (2) 1 1 (1) 0 (0) 1 (1) 3 (5) 1 (1)

Joseph C. Antonellis 8 (15) 3 (7) 1 (1)

Charlotte Black 5 (5) 0 (0)

Paul Bodart 13 (15) 6 (10) 1(2) 3 (5) 1 (1)

Alain Closier 13 (15) 4 (4) 0 (2) 1 (1) 0 (1)

Sue Concannon 15 (15) 4 (4) 1 (1)

Frank J. DeCongelio 13 (15) 9 (10) 1 (2) 5 (5)

Richard C.S. Evans 12 (15) 1 (2) 5(5)

Mary M. Fenoglio 13 (15) 10 (10) 0 (0) 5 (5)

Clara Furse 9 (15)

Mark S. Garvin 14 (15) 1 (1) 2 (2) 7 (7) 2 (2)

John S. Gubert 5 (5) 1 (1) 2 (2) 1 (1) 0 (0)

Hiroaki Harada 13 (15) 6 (7)

Naomi Harada 12 (15)

Simon M. Haslam 4 (6)

William Higgins 8 (15) 2 (2)

Tim Howell 10 (10) 4 (4) 0 (1)

Peter T. Johnston 14 (15) 7 (7)

François Marion 12 (15) 3 (4) 0 (0)

Lieve Mostrey 13 (15) 3 (4)

David Nicol 13 (15) 9 (10) 4 (4) 0 (2) 4 (5)

Alain Papiasse 3 (15)

Herschel Post 14 (15) 2 (2) 5 (7) 0 (1)

John M. Schofield 5 (5) 1 (1) 3 (4)

Jean-François Théodore 3 4 (15) 0 (6) 0 (2)

M. Andrew Threadgold 10 (10) 5 (5)

Robert C.M. Wigley 8 (12) 0 (1)

Charles F. Winters 3 (3) 0 (0) 0 (1)

1 The figure in brackets indicates the maximum number of meetings the director could have attended as a member of the relevant committee.2 Indicates attendance either as invitee (without a figure in brackets) or as ex-officio member.3 Director nominated by the ‘S’ shareholders.4 Pierre Francotte as a member of the Strategy Committee attended the Strategy Committee meetings.

74I

Relationswithshareholders

How does the Board ensure the share-holders’ views are heard?ThelargemajorityofthedirectorsontheBoardsofEuroclearplcandEuroclearSA/NVareindividualswhoareemployedbyfirmsthatuseEuroclear.AllthesefirmsarealsoshareholdersinEuroclearplc.Attheyearenddirectorsweredrawnfromfirmswhosegroupsprovide54.43%oftheusageofEuroclearfacilitiesandhold58.71%ofthesharesofEuroclearplc.Theuser-governancestructureofEuroclearmeansthatthemajorityofdirectorsareregularlyaccessibletothestakeholdersofthegroup(shareholdersandclientsalike),becausetheyareactivelyworkinginthesameindustry.

Inthecourseof2007,theNominationsandRemunerationCommitteeofEuroclear

plcconsideredthequestionofwhetherEuroclearshouldfurtherreinforceitscommunicationwithshareholders.TheCommitteereviewedthecurrentlinesofcommunicationtakingintoaccounttheCombinedCodeguidanceonrelationswithshareholdersandputtingthatguidanceintotheperspectiveoftheEuroclearusergovernanceframework.

TheCommitteeconcludedthatthecurrentarrangementsconcerningthecontentsanddistributionoftheannualreportandaccounts,thehandlingofshareholders’enquiriesbytheChairmanand/ortheBoardofEuroclearplc,theChairman’sregularvisitstoshareholdersandhisavail-ability,aswellasthatofotherdirectorsandseniormanagement,todiscussshareholdersqueriesduringoraftertheconclusionoftheproceedingsofAnnualGeneralMeetings,ensureasatisfactorydialoguebetweenthe

BoardasawholeandtheshareholdersofEuroclearplc.TheBoardendorsedtheseconclusions.

AlistofalltheshareholdersofEuroclearplc,asofregistrationscompletedatCompaniesHouseon29February2008,canbefoundontheenclosedCD-ROM.

Asinthepast,Euroclearplcsharescon-tinuenottobetradedonanyexchange.Inordertopromoteliquidityintheshares,theBoardofEuroclearplchasestablishedaBulletinBoardserviceaccessibletoshareholdersandcertainotherusers.TheBulletinBoardprovidesamechanismformakingbid/offerpricesavailabletopoten-tialbuyersandsellerswhocan,iftheysowish,contacteachotherinordertonegoti-ateatradeoutsideofthefacilityprovidedbyEuroclear.During2007,theBulletinBoardwasopenedforfivesessions.


Asoundsystemofinternalcontrolisrequiredtosafeguardshareholders’invest-ments,Euroclear’sassetsandmarketneeds.EachBoardisresponsiblefortheestablish-ment,supervisionandreviewofthesystemofinternalcontrols.Theroleofgroupman-agementistoimplementBoardpoliciesonriskandcontrols.

Theeffectivenessofthesystemofinternalcontrolsisreviewedannuallybymanage-mentoftheoperatingentities,andtheconsolidatedresultsofthatreviewarediscussedwiththeAuditCommitteesofEuroclearSA/NVandEuroclearplc.TheAuditCommitteesreporttheresultsoftheirassessmenttoeachBoard.

ThesystemofinternalcontrolsadoptedbytheEurocleargroupisdesignedtoensure:• well-orderedandprudentconduct

ofbusinessfollowingclearlydefinedobjectives;

• effectiveandefficientuseofEuroclear’sresources,maintainingtherightbalancebetweenrisk,servicequalityandcost;

• thesafeguardofEuroclearandclientassets,protectingEuroclear’sreputa-tion,financialstabilityandoperationalcontinuity;

• highqualityfinancialandreportinginformationforusebymanagementandexternalstakeholders;and

• compliancewithregulatoryrequire-ments.

TheEuroclearsystemofinternalcontrolshasbeendesignedbearinginmindtheguidancesetoutintheTurnbullReport,andwithreferencetoguidancepro-videdbytheCommitteeofSponsoring

OrganizationsoftheTreadwayCommis-sion(COSO),theBankforInternationalSettlement’sproposalsforarevisionofbankcapitaladequacyregulation(BaselII)andtheCBFAcircularonInternalControlandInternalAudit.Toenableitsmanagement,EurocleardevelopedanERMframework.

Inkeepingwithitsroleasaproviderofservicesthatarepartofthefinancialmarketinfrastructure,Euroclear’sbenchmarksforcontrollevelsaresetveryhighandarereviewedregularly.Itshouldbenoted,however,thatsuchasystemisdesignedtomanage,ratherthaneliminate,theriskoffailuretoachievebusinessobjectives.Inestablishing,supervisingandreviewingthesystemofinternalcontrols,thedirectorshaveregardtothenatureandextentofrelevantrisks,thelikelihoodofalossbeingincurredandthecostsofcontrol.

Itfollows,therefore,thatthesystemofinternalcontrolscanprovideonlyreason-able,butnotabsolute,assuranceagainsttheriskofmaterialloss.Thekeyelementsofoursystemsofinternalcontrolsaredescribedbelow.

Strategy:ourapproachtoriskmanagementEurocleariscommittedtoimplement-ingstrongriskmanagementprocesses.AuthorityisdelegatedbytheBoardofEuroclearSA/NVtotheManagementCommitteeofEuroclearSA/NVfortheimplementationofthebusinessstrategyandotherdecisionstakenbytheBoard.TheBoardapprovesthekeyriskpoliciesanditscommitteesreviewriskandcontrolareasregularlyandthoroughly.

EuroclearmaintainsaRiskRegister–acriticalcomponentoftheERM–whichclearlyidentifiesanddescribesthedifferentrisktypesthatEuroclearfaces.APolicyControlFrameworkisalsoinplacetohar-monisepoliciesandmapthemtotheserisktypes.Allnewandmostexistingpoliciesarenowcompliantwiththisframework.

Euroclearusestheconceptof‘riskappetite’and‘tolerancelevel’formarket,creditandoperationalrisk.RiskappetitesarearticulatedbytheappropriateManagementCommittee,withinthelimitsdefinedfortheuppertolerancelevelsapprovedbytheBoard,andbaseduponadvancedandrela-tivelymaturecapitalmodellingtechniquesthatthemselvesaresubjecttodetailedinternalandexternalreview.

Finally,theBalancedScorecardisanimportanttooltotranslatetheEuroclearvisionandstrategyintotangibleobjectivesandmeasures.Itsetsoutclearprioritiescascadeddownthroughthegrouptohelpmeetexpectationsintermsofday-to-dayoperations,strategicprogrammedeliveryandworkingefficiencies.

Cultureandcompetence:anactiveapproachtoriskmanagementbyappropriatelyskilledpeopleThegroupvaluesarticulatethecoreareasthatarecrucialtotheorganisationandtheexpectedcorrespondingbehaviours.Escalationprocessesuptoseniormanage-mentencouragereportingaboutissuesandtheneedtolearnfromexperience.TheManagementCommitteeoperatesatrust-basedculture,stressingtheresponsibilityandaccountabilityofseniormanagement

Internal control system


membersandcompetentstaff.InformationispasseddownasnecessaryfromtheBoardandtheManagementCommitteetothedivisionheadsandtheirteams.

Individualobjectivesdefinewhatisexpectedatemployeelevel.Theclimatesurveysofstaffopinionsensureopenfeedbackonthequalityofcommunicationacrossthegroup.Euroclearhasadoptedan‘EthicalConduct,LegalandCompliance’policyand,dur-ing2007managementhasenhancedthecomplianceprogrammethroughacompli-ancequizforallemployeesandcontrac-tors.Theintroductionofthesemi-annualmanagementassertionsonriskandcontrolsandtheongoingattentiongivenbytheManagementCommitteetoaquarterlyhighriskreporthasalsofacilitatedunderstandingoftheimportanceofthedifferentriskandcontrolprocesses,andtheimportanceofdisclosingrisksproactively,ratherthanwait-ingforexternalreviewsorinternalauditorstoraisethem.

Governance:assigningresponsibilityandauthorityTheroleoflocalmanagementoftheindi-vidualoperatingentitiesofthegrouphasbeenclarifiedandreinforcedbythecurrentcorporatestructure,throughthealignmentoffunctionsacrossthegroupandtheestab-lishmentofdivisionheadswithgroup-wideresponsibilities.

ThegovernancestructurehasbeenbetterarticulatedwiththecreationoftheRiskAccountabilityMatrix,whichdocumentsrolesandresponsibilitiesforthedifferentrisktypes.Moreover,risk,controlandcom-pliancearepartofmanagement’sobjectives.

Thisensuresthatdelegationofresponsibil-ityformanagingrisksandimplementingcontrolsiswellunderstoodandactedupon.

TheManagementCommitteehasestab-lishedseveralCommitteestoassistinitsoversightandmanagementrole.

Measurementandassessment:understandingourrisksRiskidentificationoccurscontinuouslybythedifferentbusinessunits.Inaddition,formalriskassessments(twiceannually)reviewtheentireEuroclearriskuniverse.Controlweaknessesidentifiedareloggedandproperlyprioritisedandactionplansaretrackedbymanagementandindepend-entlyvalidated.Allnewservicesorlaunchesofnewsystems/productsaresubjecttoariskassessmentthatisreviewedbyaRiskAssessmentCommittee.

Riskresponseandcontrol:addressingourrisksinanappropriatewayOperationaldepartmentshavewell-entrenchedandextensivecontrolsinplace,rangingfromthedefinitionofprocedurestoautomatedreconciliations.

Adiverserangeofcontrolactivitiesisappliedatalllevelsandtoallfunctions.Reactiontoday-to-dayoperationalinci-dentsisgenerallygoodandtimely,andpost-mortemanalysisiswidelyappliedtoidentifylessonslearned.

Reporting:gettingtherightinformationtotherightpeopleattherighttimeManagementinformationisgenerallyadequateanditsintegrityisatagoodlevel.Therearenumerousspecificperiodic

reports.Inaddition,therearewiderreports,suchastheannualemployeeclimatesurvey,providinginformationonstaffviews,andarangeofdocumentsforexternalstake-holdersincludingnewsletters,operationalbulletins,consultationpapers,andtheannualclientsurveys.ASAS70reportismadeavailabletocustomersofEuroclearBank,EuroclearFranceandEuroclearUK&Ireland.

Monitoringprocesses:assessingtheeffectivenessofourriskmanagementstrategiesMonitoringreportsandprocessesareusedtohelpmanageoperationsandcommit-tees.Theseformalprocessesaresupple-mentedbyinformalsharingofinformation,whichiswidelypractisedandencouraged.Outstandingissuesaremonitoredregularlyandoutstandingescalationsarereviewedonamonthlybasis.

KeyRiskIndicatorshavebeendevelopedfor(I)CSDsandaremonitoredregularly.

ImprovementsManagementiscommittedtothecontinu-ousimprovementofthesystemofinternalcontrolsandanumberofimprovementsmadeduring2007arereflectedabove.In2008,EuroclearwillcontinuetostrengthenITchangemanagementandassociatedactivities,inviewoftheimportantlaunchschedulesforourmajorstrategicdevelop-mentprogramme.

78I

Strong figures speak for themselves Strong financial results are both a vindication of Euroclear’s strategy, and

a platform for even more ambitious objectives. They give us the capacity

to innovate, to work for the long term and to cut costs further for our

clients. So while we’re proud of what we achieved in 2007, we can look

forward to even better performances to come.

Finance

80I Finance

Financial review

The Euroclear group is a market infrastructure

service provider to the international financial

industry. We are a user-owned, user-governed

organisation providing settlement and settlement-

related services to financial institutions in more

than 80 countries for a wide range of securities.

The Euroclear group’s financial performance is

measured in terms of net fee income and net

interest income set against operating costs. These

were influenced by several key drivers in 2007:

• Net fee income is mainly a function of the

value of securities deposited in our systems,

the number of settlement transactions and the

daily value of collateral provision outstanding.

These areas saw significant growth over the

year under review as detailed in the ‘Perform-

ance highlights’ section on page 6.

• Net interest income is derived from the

prevailing interest rates and the level of cash

balances deposited by clients, both of which

showed positive trends in 2007 (see also

the ‘Financial performance highlights’

section below).

• Operating expenses increased due to the

higher staffing and equipment levels needed

to support business growth and our planned

investment in our strategic projects.

Strongperformanceachievedin2007In2007,theEurocleargroupachievedstrongperformanceacrossallbusinessactivities,reflectingmarketconditionsdur-ingtheyearandthesuccessofthegroupinattractingnewbusiness.Weended2007inanexcellentfinancialposition,havingprocessedarecordnumberoftransactions.Profitfortheyearroseby4%to €331million.

TheEurocleargroupremainscommittedtoitsuser-owned,user-governedphilosophy.Asaresultofitsstrongbusinessperform-ance,togetherwiththeeconomiesofscaleachieved,thegroupfurtherreduceditstariffs.Overthecourseof2007,EuroclearBankintroducedmajorfeereductionsesti-matedat €100millionindifferentproductareas(i.e.internationaldebtanddomesticsafekeeping,collateralmanagement,com-municationfees).Inlinewiththepolicydefinedin2006,EuroclearBankremuner-atedclients’cashbalances,representinga

benefittothemarketof€82millionfortheyear2007.

Againstthisbackdropofcommercialsuc-cess,theaverageheadcountwasincreasedbynearly240toenableustomakespecificenhancementsinclientserviceandtohandlehigherbusinessvolumes(inEuroclearBankinparticular).Expertswerealsorecruitedforourmajorinvestmentprogrammeofplatformconsolidation,contributing,interalia,tothelaunchofsomeofthekeycomponentsofourSinglePlatform(i.e.theintroductionofnewdatacentresandESES).

FinancialperformancehighlightsThedetailedresultsfortheyeararesetoutonpage12oftheEuroclearplcfinancialstatements,whichisavailableontheen-closedCD-ROM.

Profit for the year: inspiteoftheunstablemarketsin2007,theEurocleargroup

deliveredstrongfinancialresultswithprofitfortheyearupby4%to€331millionnotwithstandingtheimpactofnewpricereductionsandcashbalanceremuneration.

Operating income roseby15%to €1,244millionfrom €1,085millionin2006,reflectinggrowthinthelevelsofsecuritiesheldforclientsandtransactionvolumesacrossalloperatingentitiesofthegroup.

Net interest income increasedby20%to€324millionandwasfavourablyinfluencedbytherisingtrendinUSDandEURinterestrates.Theserose,onaverage,from4.9%and2.8%in2006to5.0%and3.8%respectivelyin2007.Averagedepositsgrewby9%andaverageoverdraftsby23%,reflectingincreasedsettlementactivitylevels.Inlinewiththepolicydefinedin2006,EuroclearBankremuneratedlongbalancesleftondepositbyclientsovernight.

Ourbusinessenvironment


InterestincomeinEuroclearstemsfromEuroclearBank’sovernightredepositsofclients’cashbalances.ItalsostemsfromtheinvestmentofEuroclearBank’scapital,retainedearningsandtheproceedsfromsubordinateddebts.

Net fee and commission income increasedby12%to€901millionafterfeereduc-tions,demonstratingEuroclear’scontinuedorganicgrowthandsignificantbusinessgains.Increasedlevelsofdepotandhighersettlementvolumesacrossallthe(I)CSDspromptedthisgrowth,reflectingvolatilemarketconditions.Thevalueofsecuritiesheldindepotgrewby5%inthegroup,reachingalevelofabout€19trillionatyearend.EMXCoalsocontributedtothegroup’sexcellentperformanceadding€15milliontoconsolidatednetfeeandcom-missionincome.Netfeeandcommissionincomerepresents72%oftotalincome.

Administrative expensesroseby21%to€808millionin2007asaresultofcontinuousdevelopmenteffortandarelatedincreaseinstaffinglevels.Additionalpersonnelwereneededtohandleincreasedsettlementactivityandtomeettargetsforenhancedservices.

Operating profit before tax reached€435million,anincreaseof€17million(4%)on2006,reflectingstrongincomegrowthinalloperatingentities.Thisincreasealsoincludesa€7.1millioncontributionfromEMXCo.

Dividend: thedirectorsrecommendadivi-denddistributiontoordinaryshareholdersof€98million,representing€25.58per

share(comparedwith€24.20persharein2006).Wedecidedtofurtherincreasethedividendthisyearinlightofthespecificconditionsthatprevailedduringtheyear,takingintoaccountourobjectivesregardingcapitalstrength,profitabilityandbusinessgrowth.Thisdividendincreasereflectsourcontinuedcommitmenttoensuringthatshareholdersareadequatelyremuneratedfortheircapitalinvestment.

Balance sheet:totalassetsstoodat€16,328millionon31December2007,up€2,271milliononthepreviousyear.Depositsroseby€1,967million(21%),to€11,530millionandloansincreasedby22%to€12,808million.

Inthe2006financialstatements,financialinstrumentswerevaluedata‘clean’price.Inthe2007financialstatements,financialinstrumentshavebeenvaluedata‘dirty’price,i.e.includingaccruedinterest.Accordingly,thecomparativeamountsrelatingto2006havebeenrevised.Theimpactofthischangeisshowninthe‘Comparatives’paragraphofAccountingpoliciesonpage17oftheEuroclearplcfinancialstatements,availableontheen-closedCD-ROM.

Thegroupcontinuedtostrengthenitscapitalbase.Totalshareholders’equityin-creasedby8%to€3,126millionin2007.Togetherwiththeimplementationofourstrategicprogramme,theseexcellentresultsplaceusinastrongcompetitivepositionforthefuture.Asfrom1January2007,theregulatorycapitalrequirementsforthegrouphavebeendeterminedinaccordancewiththeBaselIIframework.Thegroup

enjoysstrongregulatorycapitallevelswithaTier1ratioof63%attheendof2007(comparedwith81%underBaselIattheendof2006).Thetotalcapitaladequacyratio(afterdividend)reached63%attheendof2007,comparedwith91%underBaselIattheendof2006,andtherequiredminimumof8%.

InOctober2007,ourLuxembourgsub-sidiary,EuroclearFinanceSA,exerciseditsoptiontoreimbursethe€250millionofundatedsubordinateddebt.

82I Finance

Euroclearplcsummarisedconsolidatedprofit(€ million)

2007 2006

Net interest income 323.9 271.1

Net fee and commission income 901.5 802.1

Dividend income 0.2 0.2

Realised gains on available-for-sale financial assets 0.0 0.2

Net losses on financial assets or liabilities held for trading (6.6) (6.2)

Net gains on foreign exchange 6.1 2.1

Other operating income 18.9 15.9

Operatingincome 1,244.0 1,085.4

Administrative expenses (808.2) (666.7)

Impairment (0.5) (0.5)

Operatingprofitbeforetax 4�5.� 418.2

Taxation (104.8) (99.6)

Profitfortheyear ��0.5 �18.6


Euroclearplcsummarisedconsolidatedbalancesheet(€ million)

2007 2006

Assets

Cash and balances with central banks 182.8 11.8

Loans and advances 12,625.3 10,499.2

Available-for-sale financial assets 1,266.3 1,188.9

Held-to-maturity financial assets 353.0 559.7

Financial assets held for trading 15.5 12.5

Derivatives used for hedging 3.7 2.2

Current income tax assets 2.4 2.8

Deferred income tax assets 145.7 124.4

Other assets 440.0 440.7

Pre-payments and accrued income 109.1 67.5

Property, plant and equipment 132.3 127.7

Goodwill and intangible assets 1,052.4 1,019.6

Totalassets 16,�28.5 14,057.0

Liabilities

Deposits from central banks 461.3 156.1

Deposits from banks and customers 11,068.8 9,407.0

Financial liabilities held for trading 13.4 13.0

Derivatives used for hedging 0.0 1.9

Other liabilities 1,042.3 712.3

Accruals and deferred income 230.6 226.0

Current income tax liabilities 37.7 46.8

Deferred income tax liabilities 0.8 0.5

Provisions for liabilities and charges 8.1 7.7

Pension deficit 34.7 40.5

Subordinated liabilities 304.8 558.5

Shareholders’equity 3,126.0 2,886.7

Totalliabilitiesandshareholders’equity 16,�28.5 14,057.0

84I Finance

2007 2006

Contingentliabilities 6,579.9 5,058.8

Euroclearplcconsolidatedoff-balancesheetitems(€ million)

Authorised Issued

Number Nominal value Number Nominal value

(€ denominated)

Ordinary shares of €1 each 3,330,556 3,330,556 3,330,556 3,330,556

‘S’ shares of €1 each 500,120 500,120 500,120 500,120

Unclassified shares of €1 each 169,324 169,324 - -

Total 4,000,000 4,000,000 �,8�0,676 �,8�0,676

(£denominated)

Preferred non-voting redeemable sterling shares of £1 each1 50,000 50,000 50,000 50,000

SharecapitalofEuroclearplcon26March2008

Short-term Long-term

Fitch-IBCA F1+ AA+

Standard & Poor’s A-1+ AA+

EuroclearBankcreditratings

1 Although qualifying as capital under UK law, IFRS requires that these redeemable shares are treated as a liability.


Mainoperatingentities

1 Includes dividend income, realised gains/(losses) on available-for-sale financial assets, gains/(losses) on financial assets held for trading, gains/(losses) on foreign exchange and other operating income (excluding cost recharged to group entities).

ICSD CSDs

Euroclear Euroclear Euroclear Euroclear Euroclear Bank Belgium France Nederland UK&Ireland

(e million)

2007incomestatement(underIFRS)

Net interest income 311.4 0.7 2.8 0.3 11.2

Net fee and commission income 528.8 29.2 137.2 25.7 166.8

Other operating income 1 3.2 1.0 6.9 3.7 (0.6)

Operatingincome 84�.4 �0.9 146.9 29.7 177.4

- Operating expenses (290.9) (14.0) (22.2) (14.3) (18.8)

- Costs charged to group entities 0.0 0.4 0.5 0.1 0.1

- Costs recharged by group entities (290.9) (12.5) (101.7) (13.1) (111.9)

Netoperatingexpense (581.8) (26.1) (12�.4) (27.�) (1�0.6)

Profitbeforetax 261.6 4.7 2�.5 2.4 46.8

Taxation (73.1) (1.5) (8.2) (0.6) (14.1)

Profitfortheyear(underIFRS) 188.5 �.� 15.� 1.8 �2.7

Effect of adjustments to comply with

group accounting policies and IFRS (8.0) 0.1 2.6 (0.0) 0.1

Profitfortheyearinstatutory

accountsunderlocalGAAP 180.5 �.4 17.9 1.8 �2.8

Shareholders’equityinstatutoryaccounts

underlocalGAAP 1,459.8 16.8 77.� 10.4 146.5

86I Finance

CapitalmeasurementandallocationTheCBFAinBelgiumisthemainsuper-visorofEuroclearBankandtheleadregula-torforEuroclearSA/NVandEuroclearplc.Inaddition,individualCSDsareregulatedbytheirownlocalsupervisors,whichsetandmonitorcapitaladequacyandliquidityrequirementsforthem.

InaccordancewiththeBaselIIframework,theCBFArequireseachbankandbankinggrouptomaintainaratiooftotalcapitaltorisk-weightedassetsthatcannotfallunderathresholdof8%,andaratioofTier1capitaltorisk-weightedassetsthatmustalwaysexceedathresholdof4%.

Furthermore,asacompanycloselyassoci-atedwithasettlementinstitution,EuroclearSA/NVissubjecttocertainspecificrequire-mentsregardingitssolvencyandliquidityposition.

Risk-weightedassetstakeintoconsidera-tionbalancesheetassetsandoff-balance-sheetexposuresthatmaygiverisetocreditrisk,ascalculatedforbothEuroclearBankandthegrouponaconsolidatedbasis.Collateralandothereligibleguaranteesaretakenintoaccountappropriately.

Totalcapitalisdividedintotwotiers:Tier1ismadeupessentiallyofshareholders’capital,sharepremium,consolidatedreservesandretainedearnings,whileTier2comprisesundatedsubordinatedloans.InOctober2007,theTier2ofthegroupwasreducedby€250millionasaresultofthereimbursementoftheUpperTier2debtissuedbyEuroclearFinancein2000.Inaccordancewithcapitaladequacyregula-

tions,EuroclearmonitorstheproportionoftheHybridTier1instrument(issuedin2005)thatcanbeconsideredasTier1,andreclassifiestheremaindertoTier2.Thankstothegradualgrowthofitsequitybase,EuroclearcancurrentlyqualifythetotalofitsHybridcapitalasTier1capital.GoodwillandintangiblefixedassetsaredeductedinfullfromTier1capital.ThecurrentregulatoryframeworkrequiresthatTier2capitaldoesnotexceedTier1capi-tal.Thisrequirementisverycomfortablymetbythegroup.

Thegroup’spolicyistomaintainastrongcapitalbaseandtodiversifyitssourcesofcapitalappropriately,sothatanadequaterelationshipbetweentotalcapitalandtheunderlyingrisksofthegroup’sbusinessexistsatalltimes.

Asanentitythatperiodicallyissuesdebtinstruments,EuroclearBankhasbeenassignedanAA+ratingbybothFitchandStandard&Poor’s.

Witheffectfrom1January2007,theregu-latorycapitalrequirementsforEuroclearBankbegantobedeterminedbytheBaselIIframework,bothonastand-aloneandconsolidatedbasis,aswellasforallconsoli-datedlevelsaboveEuroclearBank.Withinthisframework,Eurocleardeterminesregu-latorycapitalrequirementsbothforcreditandoperationalrisk.

Asfarascreditriskisconcerned,EuroclearhasbeenusingtheFIRBAasof1January2007,inaccordancewiththeaccreditationreceivedfromtheCBFAattheendof2006.Euroclearhasalsocomputeditscapi-

talneedsunderBaselIthroughout2007,inparallelwiththeBaselIImethodology,inordertobeabletoapply,ifnecessary,theso-calledBaselIfloorssetoutinthecapitaladequacyregulation.

Withrespecttooperationalrisk,EuroclearBankintendstoadopttheAMAin2008.AtallconsolidatedlevelsaboveEuroclearBank,Euroclearintendstoadoptahybridapproach–theso-calledAMAwithpartialuse–wheretheAMAforEuroclearBankwillbecombinedwithaStandardisedorBasicIndicatorApproachforthegroup’sotherentities.Inthatrespect,EurocleardeliveredanaccreditationfiletotheCBFAinDecember2006,anditstartedaparallelrunon1January2007.Asfarasthe2007operationalriskchargesareconcerned,thesehavebeendeterminedbasedontheBIAforallentitiesofthegroup.

Thetableontheoppositepagesetsoutthegroup’stotalcapital,whichverycomfort-ablyexceedsitsregulatoryrequirements,bothunderBaselI(2006figures)andBaselII(2007figures).Asalreadyanticipatedatthetimeoftheparallelrunforcreditrisk,Eurocleardidnotexperienceasignifi-cantchangeinitssolvencypositionasaconsequenceoftheadoptionoftheBaselIIframework,despitethenewcapitalreserva-tionrelatedtooperationalrisk.

UnderBaselII,adecreaseinthecapitalrequirementrelatedtocreditriskwasmorethancompensatedforbyanincreaserelatedtooperationalrisk,althoughthelatterisexpectedtodecreasewhenEuroclearadoptstheAMAin2008.

Capital management


Regulatorycapitalposition(€ ‘000)Thefollowingtableanalysesthegroup’sregulatorycapitalresourcesattheperiodend:

Euroclearplcconsolidated �1December2007 �1December2006

Risk-WeightedAssets �,575,19� 2,542,9�6

Requirement (RWA*8%) 286,015 203,435

Capitalbase1 2,264,758 2,�21,4�9

Tier 1 1,956,421 1,759,593

Hybrid Tier 1 297,909 297,683

Tier 2 10,429 264,163

Riskassetratios

Tier 1 63.05% 80.90%

Total 6�.�5% 91.29%

1 After proposed dividend

In the table above, the proposed dividends have been taken into account. Despite the increase in Tier 1 capital during 2007, higher risk-weighted assets under Basel II resulted in a decrease in the Tier 1 risk asset ratio compared to the situation at the end of 2006. This, combined with decrease in the Tier 2 capital following the redemption of the Undated Guaranteed Notes in October 2007, resulted in a lower total risk asset ratio at the end of 2007.

88I

TheattachedCD-ROMcomprisestheconsolidatedfinancialstatementsandParentcompanyfinancialstatementsofEuroclearplc.

Asrequiredbylaw,thestatutoryannualaccounts,theBoardofDirectors’reportandtheStatutoryAuditors’reportarefiledwithUKCompaniesHouse(Euroclearplc).

Apapercopyofthesedocumentsisavail-ableonrequestfrom:

The Company SecretaryEuroclearplcBaarermatte6340Baar,Switzerland

TheauditorshavedeliveredanunqualifiedauditopiniononthestatutoryannualaccountsofEuroclearplc.

Themanagement’sassertionstatement,togetherwiththeauditorstatementontheInter-companyTransactionPolicyimple-mentedbytheEurocleargroupisavailableonpages64and65.

Annual accounts and auditors’ opinion


Annexes

90I Annexes

13-21-7 9-18-14 16-10-12

1. SirNigelWicks Chairman

2. Jean-JacquesVerdickt1

Deputy Chairman

�. JosephC.Antonellis State Street Corporation

4. MichelBerthezène2

Caisse des Dépôts et Consignations

5. PaulBodart The Bank of New York Mellon

6. AlainClosier Société Générale

7. SueConcannon Halifax Share Dealing Limited

8. FrankJ.DeCongelio Credit Suisse Securities (USA) LLC

9. RichardC.S.Evans Deutsche Bank AG

10. MaryM.Fenoglio Citigroup

11. ClaraFurse London Stock Exchange plc

12. MarkS.Garvin�

JPMorgan plc

1�. HiroakiHarada Bank of Tokyo - Mitsubishi UFJ,

(Luxembourg) SA

14. NaomiHarada Mizuho Trust & Banking

(Luxembourg) SA

15. WilliamHiggins ABN AMRO Bank NV

16. TimHowell4

HSBC Holdings plc

17. PeterT.Johnston Goldman Sachs & Co

18. FrançoisMarion CACEIS

19. LieveMostrey Fortis Bank SA/NV

20. DavidNicol Morgan Stanley

21. HerschelPost

22. Jean-FrançoisThéodore NYSE Euronext

2�. M.AndrewThreadgold4

UBS AG

24. RobertC.M.Wigley5

Merrill Lynch International

LionelloFalconi Executive Secretary

BoardofDirectors

Board and Board Committees composition (as at 26 March 2008)

Euroclearplc

1 Appointed 29 October 20072 Appointed 26 March 20083 Senior Independent Director4 Appointed 1 June 20075 Appointed 28 March 20076 Ex-officio member


6-20-3 15-23-217-1-8

OperationsCommitteeSir Nigel Wicks, ChairmanFrank J. DeCongelioMary M. FenoglioDavid Nicol

Jean-Jacques Verdickt6

AuditCommitteeFrank J. DeCongelio, ChairmanPaul BodartMary M. Fenoglio François MarionDavid Nicol

NominationsandRemunerationCommitteeMark S. Garvin, ChairmanJoseph C. AntonellisAlain ClosierHiroaki HaradaPeter T. JohnstonHerschel Post


Sir Nigel Wicks6

BoardCommittees

• Charlotte Black, Brewin Dolphin Securities Limited, resigned on 1 June 2007• John S. Gubert, HSBC Holdings plc, resigned on 1 June 2007• Simon M. Haslam, Fidelity International Limited, resigned on 28 June 2007• Alain Papiasse, BNP Paribas, resigned on 1 February 2008• John M. Schofield, UBS Investment Bank, resigned on 1 June 2007• Charles F. Winters, Merrill Lynch, resigned on 28 March 2007 • Executive Committee was disbanded on 30 September 2007

92I Annexes

SirNigelWicksChairman

Jean-JacquesVerdickt1

Deputy Chairman

JosephC.AntonellisState Street Corporation

MichelBerthezène2

Caisse des Dépôts et Consignations

PaulBodartThe Bank of New York Mellon

AlainClosierSociété Générale

SueConcannonHalifax Share Dealing Limited

FrankJ.DeCongelioCredit Suisse Securities (USA) LLC

RichardC.S.EvansDeutsche Bank AG

MaryM.FenoglioCitigroup

ClaraFurseLondon Stock Exchange plc

MarkS.Garvin�

JPMorgan plc

HiroakiHaradaBank of Tokyo - Mitsubishi UFJ, (Luxembourg) SA

NaomiHaradaMizuho Trust & Banking (Luxembourg) SA

WilliamHigginsABN AMRO Bank NV

TimHowell4

HSBC Holdings plc

PeterT.JohnstonGoldman Sachs & Co

FrançoisMarionCACEIS

LieveMostreyFortis Bank SA/NV

DavidNicolMorgan Stanley

HerschelPost

Jean-FrançoisThéodoreNYSE Euronext

M.AndrewThreadgold4

UBS AG

RobertC.M.Wigley5

Merrill Lynch International

LionelloFalconiExecutive Secretary

BoardofDirectors

EuroclearSA/NV

1 Appointed 29 October 20072 Appointed 26 March 20083 Senior Independent Director4 Appointed 31 May 20075 Appointed 28 March 20076 To be renamed Interim Business Committee7 Ex-officio member

• Charlotte Black, Brewin Dolphin Securities Limited: mandate ended on 31 May 2007

• John S. Gubert, HSBC Holdings plc: mandate ended on 31 May 2007

• Simon M. Haslam, Fidelity International Limited, resigned on 28 June 2007

• Alain Papiasse, BNP Paribas, resigned on 1 February 2008

• John M. Schofield, UBS Investment Bank: mandate ended on 31 May 2007

• Charles F. Winters, Merrill Lynch, resigned on 28 March 2007


ExecutiveCommittee6

Sir Nigel Wicks, ChairmanPaul BodartWim ClaeysAlain ClosierIgnace R. CombesFrank J. DeCongelioRichard C.S. EvansMary M. FenoglioPierre FrancotteMark S. GarvinFrederic HannequartWilliam HigginsFrançois MarionDr. Tim MayJoël MérèreDavid NicolHerschel PostAndré RollandJean-François Théodore Jean-Jacques Verdickt

ManagementCommitteePierre Francotte, ChairmanWim ClaeysIgnace R. Combes Frederic HannequartDr. Tim MayJoël MérèreAndré Rolland

StrategyCommitteeSir Nigel Wicks, ChairmanJoseph C. AntonellisPaul BodartAlain ClosierSue ConcannonPierre FrancotteTim HowellHerschel PostRobert C.M. Wigley


RiskPolicyCommitteeRichard C.S. Evans, ChairmanPaul BodartTim HowellM. Andrew ThreadgoldJean-Jacques Verdickt

Sir Nigel Wicks7

AuditCommitteeFrank J. DeCongelio, ChairmanPaul BodartMary M. FenoglioFrançois MarionDavid Nicol

BusinessModelImplementationCommitteeSir Nigel Wicks, ChairmanAlain ClosierSue ConcannonMark S. GarvinLieve MostreyDavid NicolJean-Jacques Verdickt

NominationsandRemunerationCommitteeMark S. Garvin, ChairmanJoseph C. AntonellisAlain ClosierHiroaki HaradaPeter T. JohnstonHerschel Post


Sir Nigel Wicks7

ExecutiveCompensationCommitteeSir Nigel Wicks, ChairmanPaul BodartAlain ClosierFrank J. DeCongelioMark S. GarvinWilliam HigginsHerschel Post


BoardCommittees

94I Annexes

BoardofDirectors

FredericHannequart1

ChairmanYvesPoullet1

Chief Executive OfficerIgnaceR.CombesPierreYvesGoemans2

Dr.TimMayAndréRolland�

LucVantomme4

YannicWeber1

Jean-JacquesVerdicktIndependent

SusanY.StensonCompany Secretary

BoardCommittees

ManagementCommitteeYves Poullet, ChairmanAndré RollandLuc VantommeYannic Weber AuditCommitteeJean-Jacques Verdickt, ChairmanIgnace R. CombesDr. Tim May

Fabien Debarre5

Fernando Díaz5

NominationsCommittee6

Frederic Hannequart, ChairmanJean-Jacques Verdickt

RemunerationCommittee6

Pierre Francotte, Chairman7

Jean-Jacques Verdickt

Frederic Hannequart5

BoardofDirectors

IgnaceR.CombesChairmanStéphaneBernardChief Executive Officer AnneSwaelus2

PaulTaylor2

FrancisRemacleIndependent

MarcDeJaegerCompany Secretary

BoardCommittees

ManagementCommitteeStéphane Bernard, ChairmanMarc De Jaeger3

Pierre-Paul Stacanov

AuditCommitteeFrancis Remacle, ChairmanFabien DebarrePaul TaylorAnso Thiré

NominationsandRemunerationCommitteeIgnace R. Combes, ChairmanFrancis Remacle

BoardofDirectors

IgnaceR.Combes1

ChairmanJoëlMérèreVice ChairmanPierreSlechtenChief Executive OfficerAndréRolland2

ValérieUrbain1

GérardSoularueIndependentAlainPochet�

BNP Paribas

NadineMollier4

GrazynaThébault4

VeroniqueJehanCompany Secretary

BoardCommittees

AuditCommitteeGérard Soularue, ChairmanFabien DebarreValérie Urbain

AdmissionCommitteePierre Slechten, ChairmanJohan ArendalPhilippe BertholleBrigitte DaurelleJérôme Ladousse

NominationsCommitteeIgnace R. Combes, ChairmanGérard Soularue

RemunerationCommittee5

Pierre Francotte, Chairman6

Ignace R. CombesGérard Soularue

EuroclearBankSA/NV EuroclearBelgium1 EuroclearFranceSA

1 Appointed 23 June 20072 Appointed 20 March 20083 Appointed 14 May 20074 Appointed with effect 1 January 20075 Committee observer6 Committees created on dissolution of Nominations

and Remuneration Committee7 Function held by the Euroclear SA/NV Chief Executive Officer

• Paul Taylor resigned with effect 1 January 2007 • Pierre Francotte resigned with effect 22 June 2007• Martine Dinne resigned with effect 23 June 2007• Wim Claeys resigned on 20 March 2008

1 Trade name for Caisse Interprofessionnelle de Dépôts et de Virement de Titres/Interprofessionele Effectendeposito -en Girokas (CIK) SA/NV

2 Appointed 20 June 20073 Appointed 4 July 2007

• Hugo Spanjer resigned with effect 31 October 2007• Yves Poullet resigned with effect 20 June 2007• Yannic Weber resigned with effect 20 June 2007

1 Appointed 22 March 20072 Appointed 10 March 20083 Censeur4 Members of the Euroclear France SA Works Council whose

attendance at Board meetings is a legal requirement5 Committee created on dissolution of Nominations and

Remuneration Committee6 Function held by the Euroclear SA/NV Chief Executive Officer

• Pierre Francotte resigned on 24 May 2007• Martine Dinne resigned on 24 May 2007• Frederic Hannequart resigned on 10 March 2008• Fernando Díaz resigned from the Audit Committee

on 10 March 2008


BoardofDirectors

IgnaceR.CombesChairmanGuySchuermansChief Executive OfficerWimClaeysAnsoThiré�

JosdeWitIndependent

GerardHartsink4

HugoSpanjerCompany Secretary

BoardCommittee

AuditCommitteeJos de Wit, ChairmanFabien DebarreFernando DíazAnso Thiré

BoardofDirectors

PierreFrancotteChairmanDr.TimMayChief Executive Officer RichardCrewsJohnTrundle2

YannicWeber

HerschelPostIndependentMikeWilliamsIndependent

DavidWhiteheadCompany Secretary

BoardCommittees

AuditandComplianceCommitteeHerschel Post, ChairmanFabien DebarreMike Williams

Geoffrey Mitchell3

NominationsandRemunerationCommitteePierre Francotte, ChairmanHerschel PostMike Williams

BoardofDirectors

Dr.TimMayChairmanMaxWrightChief Executive OfficerDavidBurkeTomChallenorThreadneedle Asset Management LimitedPierreYvesGoemansYannicWeberTonyWood

DavidWhiteheadCompany Secretary

BoardCommittee

AuditCommitteeTom Challenor, ChairmanDavid BurkeFabien DebarreMartin Ingell

EuroclearNederland1andEuroclearNIEC2

EuroclearUK&IrelandLimited1

EMXCompanyLimited

1 Trade name for Nederlands Centraal Instituut voor Giraal Effectenverkeer (NECIGEF) BV

2 Trade name for Nederlands Interprofessioneel Effectencentrum (NIEC)

3 Appointed 26 June 20074 Observer

• Yves Poullet resigned on 26 June 2007

1 On 2 July 2007 CRESTCo Limited changed its name to Euroclear UK & Ireland Limited

2 Appointed 18 June 20073 Independent

• Frederic Hannequart resigned with effect 18 June 2007• Martine Dinne resigned with effect 18 June 2007

96I Annexes

Market Advisory Committees (MACs)

Belgium-TheNetherlands

EricHollanders,ChairmanING BankGerardHartsink,Vice-ChairmanABN AMRO Bank NVGautierBatailledeLongpreyBank Degroof SANicoBlomKas Bank NVGerardFransenRabobank NederlandPeterHannesKBC NVMarcelJongmansFortis Bank NVBettyMulder-MosmanDeutsche BankErwinReyesCitiDamienRoegiersNYSE EuronextEricStruyePetercam SAAlfonsVaesNational Bank of BelgiumHennyvanderWielenDe Nederlandsche Bank NV

ObserversRepresentative Belgian MECPatrick DrognéFebelfin

Representative Dutch ACSIRuud SleenhoffABN AMRO Bank NV

France

AlainPochet,ChairmanBNP ParibasRobertBaconnierEmetteursRolandBellegardeNYSE EuronextPierreYvesBerthonAFGMichelBoisCACEISXavierBonneruLCL Le Crédit LyonnaisPhilippeCastelanelliHSBC FranceNorbertCronNatixisAdrienDeckerCrédit Mutuel/CIC

EmmanueldeFournouxAFEIEricdeGaydeNexonSociété GénéraleGuydeLeusseEntreprises d’InvestissementDominiqueDeWitGroupe Crédit Agricole SAJean-MarcEyssautierCACEIS BankChristopheHemonLCH.Clearnet Jean-MichelLeclercqSociété GénéraleYvonLucasBanque de FranceJean-FrançoisReynaudGestitresMarcelRoncinAFTIJeanTricouFédération Bancaire FrançaiseJean-FrançoisViouAFSF

ObserversCorinne LambertAMTEJacques VanhautèreCRI

Ireland

BrianHealy,ChairmanIrish Stock ExchangeEamonnDoyleDavy StockbrokersAlbertFarrellBastow CharltonEileenKellyGoodbody StockbrokersAudreyKinsellaBank of Ireland Securities ServicesGrahamO’BrienNCB StockbrokersPatO’DonoghueCapita Corporate Registrars plcPaulShielsNational Treasury Management Agency GrahamShuttlewoodThe Royal Bank of ScotlandHelenYoungCentral Bank and Financial Services Authority of Ireland

UK

PenKentCBEChairmanChrisAddenbrookeCapita RegistrarsAndrewBaldockAbbey StockbrokersRichardBarberCitibank NARobertBarnesUBSPhilippeCastelanelliHSBC Bank plcVictoriaClelandBank of EnglandMikeHinesWinterflood Securities LtdRobertHowardCharles StanleyJaneLeviMerrill LynchNeilMartinCredit SuisseVerityPeelTullett Prebon NickScottDeutsche Bank AGDavidShrimptonLondon Stock ExchangeRobertStheemanUK Debt Management Office

Cross-BorderMAC

AlainPochet,ChairmanBNP ParibasCharlotteBlackBrewin Dolphin SecuritiesMichelBoisCACEIS SteveDaviesMerrill LynchDianaDijmarescuJPMorgan Chase & Co GerardFransenRabobank NederlandGerardHartsinkABN AMRO Bank NVBrianHealyIrish Stock ExchangeEricHollandersING BankPenKentCBE


Euroclearplc

Registeredoffice2 Lamb’s PassageLondon EC1Y 8BB, UK

ExecutiveofficeBaarermatte6340 Baar, Switzerland

EuroclearSA/NVEuroclearBankSA/NVCalarBelgiumSA/NV1 Boulevard du Roi Albert II1210 Brussels, Belgium

EuroclearBelgium1

6, Avenue de Schiphol1140 Brussels, Belgium

EuroclearFranceSAEuroclear Properties France SAS115, Rue Réaumur75081 Paris, Cedex 02, France

EuroclearNederland2

EuroclearNIEC�

Herengracht 459-469, 1st Floor1017 BS Amsterdam, The Netherlands

EuroclearUK&IrelandLimited33 Cannon StreetLondon EC4M 5SB, UK

EuroclearFinance2SA5, Rue Guillaume Kroll1882 Luxembourg, Luxembourg

EuroclearInvestmentsSAEuroclearReSA12, Rue Eugène Ruppert2453 Luxembourg, Luxembourg

EMXCompanyLimited2nd Floor NorthCharrington’s HouseThe CausewayBishop’s StortfordHertfordshire CM23 2ER, UK

EuroclearLatinAmericaLtda

RegisteredofficeRua Boa Vista, 254São Paulo, SP, Brazil

AdministrativeofficeAv Brigadeiro Faria Lima, 37295° Floor/CEP 04538-905São Paulo, SP, Brazil

EuroclearSA/NVBranchOffices

AmsterdamHerengracht 459-469, 1st Floor1017 BS Amsterdam, The Netherlands

London33 Cannon StreetLondon EC4M 5SB, UK

Paris115, Rue Réaumur75081 Paris, Cedex 02, France

EuroclearBankRepresentativeOffices

FrankfurtEuroclear Bank Representative OfficeBörsenplatz 560313 Frankfurt, Germany

HongKongEuroclear Bank Representative Office Room 2301-2304Citic Tower1 Tim Mei Avenue Central, Hong Kong

NewYorkEuroclear Bank Representative OfficeOne Battery Park Plaza, 24th FloorNew York, N.Y. 10004, USA

SãoPauloEuroclear Latin America LtdaAv Brigadeiro Faria Lima, 37295° Floor/CEP 04538-905São Paulo, SP, Brazil

SingaporeEuroclear Bank Representative Office80 Raffles Place # 30-22UOB Plaza 2Singapore 048624

TokyoEuroclear Bank Representative OfficeThe Imperial Hotel Tower 9F1-1 Uchisaiwaicho 1-chome,Chiyoda-KuTokyo 100-0011, Japan

1 Trade name for Caisse Interprofessionnelle de Dépôts et de Virement de Titres/Interprofessionele Effectendeposito- en Girokas (CIK) SA/NV

2 Trade name for Nederlands Centraal Instituut voor Giraal Effectenverkeer (NECIGEF) BV

3 Trade name for Nederlands Interprofessioneel Effectencentrum (NIEC) BV

Euroclear group principal offices

98I

WimVanlessen,BelgiumWimtrainedattheRoyalBalletSchoolofAntwerp,andbecameaprincipaldancerin2004.Overhis10-yearcareer,hehasappearedinnumerousimportantworksandhaswonseveralinternationalawards.

Thanks to the Royal Ballet of Flanders

Thedancers

AkiSaito,JapanAkitrainedattheTomokoKurosawaBalletStudio(Japan)andtheRoyalBalletSchoolofAntwerp.Aprin-cipaldancersince2004,shehasplayedthetitlerolesinnumeroushighprofileproductionsandin2007receivedthe‘LesEtoilesdeBallet’CriticsAward.

AlainHonoré,BelgiumAlaintrainedattheRoyalBalletSchoolofAntwerpandbecameaprincipalin2004.HehasplayedkeyrolesinimportantworkssuchasRomeo&Juliet(Mercutio,Romeo),ThèmeetQuatreVariations,TheNutcracker(PrinceDrosselmeyer)andGiselle(Albrecht).

ClairePascal,France

AgraduateoftheConservatoireSupérieurdeLyon,Clairehasper-formedwiththeGrandThéâtredeGenèveandtheSanFranciscoBalletbeforejoiningtheRoyalBalletofFlandersasaprincipalin2006.ShewonaGoldMedalattheEugeniaPoliakovInternationalCompetition.

MikelJurequi,Spain

AftertrainingattheIonBeitiaschoolinBilbaoandtheJohnCrankoschoolinStuttgart,MikeljoinedtheRoyalBalletofFlandersin2006andbecameleadsoloistin2007.HisrecentperformancesincludeTheReturnofUlysses,SleepingBeauty,HermanSchmerman,InsidersandLostbyLast.

EvaDewaele,BelgiumEvatrainedattheRoyalBalletSchoolofAntwerpandtheAmericanBalletNewYork.Shehasperformedaroundtheworldandin2005becametheRoyalBalletofFlanders’firstsoloist.Inadditiontodance,shehaspursuedherinterestsinchoreography,filmandfashion.

KathrynBennetts,Australia

BorninSydney,KathrynBennettshasstudied,performedandtaughtaroundtheworld.AprotégéofMarciaHaydeeandWilliamForsythe,herinternationalcareerhastakenhertoeverycontinent.ShejoinedtheRoyalBalletofFlandersasArtisticDirectorin2005.


Thephotographer

TheRoyalBalletofFlanders

TheKoninklijkBalletvanVlaanderen(RoyalBalletofFlanders),establishedinAntwerpin1969,isthelargestclassicaldancecom-panyinBelgium.TheBallettoursgloballyanditsworkconsistsmainlyofrepertoireproductions.

JohanPersson,SwedenBeforebecomingafull-timephotographer,Swedish-bornJohanPerssonwasaprincipaldancerwiththeNationalBalletofCanadaandtheBritishRoyalBallet.Johanspecialisesintheatreadvertisingandproductionphotography,andhisworkhasbeenwidelyexhib-itedinEuropeandJapan.

AMAAdvanced Measurement Approach

BIABasic Indicator Approach

CBFACommission Bancaire, Financière et des Assurances - Belgian Banking, Finance and Insurance Commission

CCICommon Communication Interface

CCPCentral Counterparty

CSDCentral Securities Depository

DBVDelivery By Value

DVPDelivery Versus Payment

ECBEuropean Central Bank

ERMEnterprise Risk Management

ESESEuroclear Settlement of Euronext-zone Securities

FIRBAFoundation Internal Ratings Based Approach

FIXFinancial Information eXchange

FSAUK Financial Services Authority

GAAPGenerally Accepted Accounting Principles

GDPGross Domestic Product

ICSDInternational Central Securities Depository

(I)CSDThe CSDs and the ICSD of the group

IFRSInternational Financial Reporting Standards

ISMAGInternational Securities Market Advisory Group

ISOInternational Organisation for Standardisation

JGBJapanese Government Bond

MAC Market Advisory Committee

MiFIDMarkets in Financial Instruments Directive

OECDOrganisation for Economic Co-operation and Development

ORMOperational Risk Management

OTCOver-The-Counter

SAS 70Statement on Auditing Standards No 70

SBISociétés de Bourses Intermédiaires - ESES pre-settlement trade confirmation platform

SETSLondon Stock Exchange Electronic Trading System

SSESingle Settlement Engine

STPStraight-Through Processing

T2STARGET2-Securities, proposal by the ECB to offer securities settlement services to CSDs in central bank money in euro

SSEThe Single Settlement Engine consolidates the core settlement applica-tions of the (I)CSDs of the Euroclear group. Today, Euroclear Bank, Euroclear France and Euroclear UK & Ireland are connected to the SSE. Euroclear Belgium and Euroclear Nederland will connect to the SSE as part of their move to ESES.

ESESEuroclear Settlement of Euronext-zone Securities is an important intermedi-

ary step towards the Single Platform. ESES provides the Euronext-zone market CSDs (Euroclear Belgium, Euroclear France and Euroclear Nederland) with an integrated settlement solution and harmonised custody services. ESES is being implemented gradu-ally as of November 2007.

CCIThe Common Communication Interface is Euroclear’s single inter-face for accessing the serv-ices offered by the group.

Clients will be able to use the STP channel AutoFlow and the screen-based inter-face ScreenFlow.

Single PlatformEuroclear’s single applica-tion platform, delivering harmonised group custody and settlement services, among others, to the clients of all the (I)CSDs of the group. All clients will use the CCI to connect to the Single Platform.

Glossary

Acronyms

Perform

ing on the biggest stage there isEuroclear annual report2007

Euroclear plcExecutive officeBaarermatte6340 BaarSwitzerland

Euroclear plc is incorporated in England and Wales under registered number 1060802, with registered address at 2 Lamb’s Passage, London EC1Y 8BB, United Kingdom

Euroclear SA/NV1 Boulevard du Roi Albert IIB-1210 Brussels, BelgiumTel. +32 (0)2 326 1211RPM Brussels number 0423 747 369www.euroclear.com

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

© 2008 Euroclear SA/NV

Performing onthe biggest stage there is

Euroclear annual report 2007

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