Bermuda Stock Exchange X Asamblea General ACSDA ACSDA 10th General Assembly Introduction to the BSX &BSD Greg Wojciechowski - President & CEO Neville Caines – BSX Operations Manager

Bermuda Shorts 7 hours to LGW 2 ½ hours to Miami Only 11/2 hours from NY 7 hours to LGW 2 ½ hours to Miami

Bermuda Snapshot Bermuda is a British Overseas Dependent Territory; Stable democratically elected and fiscally responsible government; Bermuda’s law is based on English Common Law with final court of appeal being the UK’s Privy Council; Bermuda maintains very high credit rating with global rating agencies one of the lowest of government indebtedness among rated sovereigns; GDP Per Capita is forecast to be nearly $90,000 in 2008. First, I’d like to give a little quick background on the BSX. The BSX was founded in 1971 as the domestic stock market for Bermuda, and has supported a thriving local market ever since. In 1995, after several years of planning, the new international board of the BSX was opened to list institutional investments such as offshore funds and hedge funds, specialist debt, restricted marketing equities, and to offer niche trading. With our long history, the BSX quickly received recognition as a Designated Offshore Securities Market under Reg S. The BSX is seeking additional designations from other important jurisdictions like the UK. Bermuda is an OECD member nation, and the BSX is an affiliate member of IOSCO and the FIBV. As such, we have the credentials that most institutions seek in a listing. Our growth has been tremendous: we currently have more than 250 listings, including more than 170 funds, and our trading surpasses $1 billion a month (primarily in international trading).

Bermuda Business Snapshot More than 50% of Fortune 500 companies are registered and do business in Bermuda Bermuda is the leader in Captive Insurance Market Bermuda is one of the largest Property catastrophe reinsurance markets with over 1400 companies domiciled Leading global fund administration centres with 70 licensed administrators Vibrant Trust and Private Banking sectors First, I’d like to give a little quick background on the BSX. The BSX was founded in 1971 as the domestic stock market for Bermuda, and has supported a thriving local market ever since. In 1995, after several years of planning, the new international board of the BSX was opened to list institutional investments such as offshore funds and hedge funds, specialist debt, restricted marketing equities, and to offer niche trading. With our long history, the BSX quickly received recognition as a Designated Offshore Securities Market under Reg S. The BSX is seeking additional designations from other important jurisdictions like the UK. Bermuda is an OECD member nation, and the BSX is an affiliate member of IOSCO and the FIBV. As such, we have the credentials that most institutions seek in a listing. Our growth has been tremendous: we currently have more than 250 listings, including more than 170 funds, and our trading surpasses $1 billion a month (primarily in international trading).

BSX Snapshot BSX founded in 1971 Over 550 listings 16 Trading Members and Listing Sponsors Daily trading Rolling T + 3 Settlement Market Cap over $ 350 Billion First, I’d like to give a little quick background on the BSX. The BSX was founded in 1971 as the domestic stock market for Bermuda, and has supported a thriving local market ever since. In 1995, after several years of planning, the new international board of the BSX was opened to list institutional investments such as offshore funds and hedge funds, specialist debt, restricted marketing equities, and to offer niche trading. With our long history, the BSX quickly received recognition as a Designated Offshore Securities Market under Reg S. The BSX is seeking additional designations from other important jurisdictions like the UK. Bermuda is an OECD member nation, and the BSX is an affiliate member of IOSCO and the FIBV. As such, we have the credentials that most institutions seek in a listing. Our growth has been tremendous: we currently have more than 250 listings, including more than 170 funds, and our trading surpasses $1 billion a month (primarily in international trading).

The BSX’s Mission To develop an efficient , electronic domestic market To develop the listing of Investment Funds and other International Securities To build the infrastructure to make Bermuda the world’s first truly offshore, international capital market At the end of last year the Council of the Exchange approved a new strategic plan which set out the following objectives for the next two years: [Read Slide] Underlying each of these objectives is the need for the Exchange to obtain international recognition. This requires us to introduce new regulations and systems and also to establish a regulatory regime for the whole securities industry, within which the Exchange can be seen to be properly regulated by the BMA. We would therefore like to work closely with the BMA on the finalisation of the Investment Services Act. Let me now tell you where we are on each of these objectives.

Sound Legal Framework Bermuda Stock Exchange Private Act - 1992, 1996, 1997, 2002 Financial Institution under Schedule 3 of BMA Act 1969 Power to Make Regulations - subject to prior consent of BMA

International Recognitions Full Member of World Federation of Exchanges “DOSM” status from US-SEC “Registered Organisation” - LSE Designated Investment Exchange - UK Financial Services Authority Approved Stock Exchange – Australian tax authorities Recognised Investment Exchange – The BMA Affiliate Member – IOSCO Recognised Stock Exchange – UK’s HM Revenue & Customs

Over 550 BSX Listings

Trading & Settlement Fully electronic BEST - Trading System, CLOB based BSD - Fully integrated settlement and Depository system

Bermuda Securities Depository BSD Bermuda Securities Depository The BSX Clearing, Settlement and Depository Service Neville Caines www.bsx.com

The BSD Advantage BSD BEST Trading

What is BSD? BSD is a wholly owned subsidiary of the BSX This company was implemented and operates a fully electronic clearing, settlement and depository service to be known as the Bermuda Securities Depository (BSD) The service was introduced during the first half of 2001 It operates basically the same way as other central depositories although it was adapted to the Bermuda environment.

Situation with BSD To enter stock into the BSD, investors will lodge certificates (unless book form) through the use of transfer forms, to transfer legal ownership to BSD nominee Settlement of BEST trades will then take place by book entry transfer within the depository system Investors may withdraw certificates if they wish but this will be discouraged

Overview BSD Clearing Settlement Depository BEST Best trades are passed automatically to BSD through the gateway. BSD Clearing Settlement Depository Brokers, custodians/institutions and foreign depositories may be members BSD checks trades for validity, e.g. valid account and sufficient stock and funds. Stock is deducted from the seller’s account and added to the buyer’s account by book entry transfer. Payments are netted at participant level and net amounts are paid to/received from BSD. Stock is held in dematerialised form at account within member – details are provided to the registrar.

Summary of Benefits The implementation of the Bermuda Central Depository (BSD) provides brokers and custodians in Bermuda with: a book entry transfer settlement system which avoids the need for the movement of paper to settle a trade a central guarantee that once a trade has been accepted then stock and money will pass no bad delivery of stock because all stock is validated for good delivery before acceptance registration on settlement due date so faster turnround of stock a system that is volume insensitive – enabling significant volume increases without extra manual processing a platform for future growth and expansion.

BSD Members Yes No Own accounts Omnibus Account Brokers, Custodians, Institutions and Foreign Depositories may become participants. They have access to facilities as follows:- Trading Clearing Settlement Depository Brokers Yes Custodians No Institutions Own accounts Foreign Depositories Omnibus Account

Cash Movement A payment statement is produced by the BSD for each participant on T, showing net funds to pay or receive on T+3 On T+3 net funds are settled between participants and BSD Brokers who are net payers instruct a transfer of funds to BSD BSD acts as a Central Guarantor for the settlement of all trades Settlement Cap Guarantees in place for all Brokerages

Check and Update inventory Clearing BEST sold order 20 shares acct. U A Buy order 20 shares Acct. Z C OK? Trade executes Update inventory 30 10 25 50 45 Check Settlement Cap + bank guarantee + cash + sales - purchases Owned Available A B C U 50 V 10 W 25 X Y Z 30 10 25 50 Check and Update inventory BSD provides guarantee that all trades will settle

Interface with Users Brokers and Issuers (and/or a third party registrar) can interface with BSD through: our secure website receipt of information by e-mail; receipt of printed reports Frequency of output dependent on Issuers connection or pre-agreed conditions

System Access Trader Secure Website BEST Different Same Log In Log In BSD Different Log In Settlement Staff Same Log In Access Levels

Closing Summary BSD offers a central guarantee, but will not be at risk as Stock: BSD checks that stock is available for settlement (in a specified BSD account) and freeze the stock in the account Funds BSD checks that funds are available for settlement through the use of a settlement cap Clearing members are required to support their net trading balance (settlement cap) by providing a bank guarantee or cash Bermuda banks or foreign banks with good credit rating may provide the guarantee Catastrophe insurance against bank default