1. Department of Finance Datong Kuo Chang April, 2005 Copyright © 2003. Citibank, N.A. All rights reserved. CITIGROUP and the Umbrella Device are trademarks and service marks of Citicorp and its affiliates and are used and registered throughout the world. Citigroup ® Global Transaction Services National Taiwan University

2. 2 go to View, Header and Footer to set date Agenda » Investment Industry Value Chain » Who needs a custodian? » What services do custodians provide? › Service model (direct vs. global window) › Sub-custodian network (proprietary vs. third-party) » Who are the top ranking providers? » How are they measured? » What are the risks to the custodians? » Taiwan Market

3. 3 go to View, Header and Footer to set date Transaction Processing 4 Asset Accumulation 1 Asset Management 2 Transaction Execution 3 Fiduciary and Investor Services 7 Investment Industry Value Chain Investment Accounting 5 Performance Measurement 6 Focus on the transaction processing & portfolio administration stages of the clients investment value chain Fund managers Brokers Custodians Trustee/ others Pensions, Mutual funds

4. 4 go to View, Header and Footer to set date Definition of “Custody” or “Global Custody” » First developed with the passage of the Employee Retirement Security Act of 1974 in the US => fund managers were required to segregate client assets from own assets. » In the 90’s, the industry experienced substantial growth. Custodians also spent big money to boost their technology and efficiency. » What started off as a complementary service has become a global scale business. WHAT CUSTODY AIMS TO PROVIDE? Safekeeping and protection of financial assets Facilitating the trading of such assets Tracking the values of portfolios

5. 5 go to View, Header and Footer to set date Agenda » Investment Industry Value Chain » Who needs a custodian? » What services do custodians provide? › Service model (direct vs. global window) › Sub-custodian network (proprietary vs. third-party) » Who are the top ranking providers? » How are they measured? » What are the risks to the custodians? » Taiwan Market

6. 6 go to View, Header and Footer to set date » Division of professional specialties » Cross border investment activities » Regulatory requirement Who Needs A Custodian?

7. 7 go to View, Header and Footer to set date Agenda » Investment Industry Value Chain » Who needs a custodian? » What services do custodians provide? › Service model (direct vs. global window) › Sub-custodian network (proprietary vs. third-party) » Who are the top ranking providers? » How are they measured? » What are the risks to the custodians? » Taiwan Market

8. 8 go to View, Header and Footer to set date What Services Do Custodians Provide? » Transaction Processing › Clearing › Settlement › Cash Management › Foreign Exchange › Safekeeping › Reporting › Corporate Actions › Securities Lending › Tax Reclamation

9. 9 go to View, Header and Footer to set date What Services Do Custodians Provide - continued » Investment Accounting › Net asset valuations › Profit/ Loss › Statement – management and regulatory › Multi-currency accounting › Compliance monitoring » Performance Measurement › Alliance with Frank Russell Company

10. 10 go to View, Header and Footer to set date Service Model - Direct Custody CLIENT Citibank Canada Citibank Singapore Citibank France Citibank Malaysia Citibank Hong Kong Citibank Italy Citibank UK Citibank USA

11. 11 go to View, Header and Footer to set date Service Model - Direct Custody - continued Operating Procedures : » Direct access to local A/Cs and local service contacts » It suits sophisticated institutional investor that › has knowledge of the foreign markets; and › has set up its own back-office operations to manage the multiple accounts in various markets Benefits to Client : » Direct access to market information » Transaction timeliness » Better cut-off times » Facilitate quick turnaround of asset trading » Readiness to customize based on local conditions

12. 12 go to View, Header and Footer to set date Service Model – Global Custody Single Window Operations

13. 13 go to View, Header and Footer to set date Service Model - Global Custody - continued » Benefits to clients » One-stop shop » Dedicated service manager » Local support » Same time zone » Same language » Extended service hours

14. 14 go to View, Header and Footer to set date Canada Argentina Chile Peru Brazil Colombia Mexico Puerto Rico Americas United States Ecuador Citigroup’s proprietary network covers 95% of Total Market Capitalization of the world Indonesia Malaysia New Zealand Asia Australia Hong Kong India Japan Korea Shenzhen Taiwan Philippines Thailand Singapore Europe Austria Ireland United Kingdom Luxembourg Jersey Portugal Italy Spain Netherlands Germany Greece France Switzerland Belgium Finland Sweden Norway Denmark Depository Relationships Bermuda South Africa Israel Botswana Slovenia Croatia Bangladesh Bulgaria Estonia Latvia Lithuania Mauritius Slovakia Shanghai - Proprietary - Third Party Venezuela CEEMEA Czech Republic Egypt Sri Lanka Hungary Jordan Morocco Pakistan Poland Romania Russia Turkey Ukraine Zimbabwe Euroclear Clearstream Costa Rica

15. 15 go to View, Header and Footer to set date Benefits of Proprietary Network to the Client » More favorable cut-off times » Local market knowledge » Control of services & costing » Consistent technology » Fast problem resolution » Higher STP rates

16. 16 go to View, Header and Footer to set date Agenda » Investment Industry Value Chain » Who needs a custodian? » What services do custodians provide? › Service model (direct vs. global window) › Sub-custodian network (proprietary vs. third-party) » Who are the top ranking providers? » How are they measured? » What are the risks to the custodians? » Taiwan Market

17. 17 go to View, Header and Footer to set date Who Are The Top Ranking Providers? » Well capitalized banks › Citigroup › JP Morgan Chase › Bank of New York › HSBC » Specialized banks › State Street › Mellon Trust › Northern Trust › Brown Brothers Harriman › BNP –Paribas

18. 18 go to View, Header and Footer to set date Agenda » Investment Industry Value Chain » Who needs a custodian? » What services do custodians provide? › Service model (direct vs. global window) › Sub-custodian network (proprietary vs. third-party) » Who are the top ranking providers? » How are they measured? » What are the risks to the custodians? » Taiwan Market

19. 19 go to View, Header and Footer to set date How Are They Measured? » Size › Asset Under Custody (AUC) › Transaction Volume » Information Delivery › Accuracy › Speed » Service Quality › Advise on market/ infrastructure change › Technology › Flexibility in handling exception processing › Ability to influence market/regulation change › Competitive fees

20. 20 go to View, Header and Footer to set date Citigroup Securities Services - a core business 50,000 transactions processed daily with average turnover of $60 billion 2,500 global investors and issuers served; 70% fund managers & brokers More than $6.6 Trillion Assets Under Custody Network spanning 70 markets. Largest proprietary network with 45 countries Citigroup S&P AA- Moody’s Aa1 Fitch IBCA AA+ Citibank N.A. S&P AA Moody’s Aa1 TransactionsClientsAssetsNetworkCredit Ratings

21. 21 go to View, Header and Footer to set date Agenda » Investment Industry Value Chain » Who needs a custodian? » What services do custodians provide? › Service model (direct vs. global window) › Sub-custodian network (proprietary vs. third-party) » Who are the top ranking providers? » How are they measured? » What are the risks to the custodians? » Taiwan Market

22. 22 go to View, Header and Footer to set date What Are The Risks To Custodian? » Operational » Credit » Technology » Regulatory

23. 23 go to View, Header and Footer to set date Agenda » Investment Industry Value Chain » Who needs a custodian? » What services do custodians provide? › Service model (direct vs. global window) › Sub-custodian network (proprietary vs. third-party) » Who are the top ranking providers? » How are they measured? » What are the risks to the custodians? » Taiwan Market

24. 24 go to View, Header and Footer to set date Characteristics of the Taiwan Market » Regulations define both products and clients » Taiwan is well known for tight regulatory control » Market-induced efficiency › Fully automated trading systems › Tight T+1 settlement cycle › Severe penalty on failed trade » Restrictions minimize credit exposure › No or very restricted financing allowed » Continuous lobbying for deregulation

25. 25 go to View, Header and Footer to set date Global Securities Services in Taiwan » Established in 1989 » Current asset under custody: US$54 billion » Transaction volume: 11,000 - 21,000 per month » Client base › Foreign Institution investors (FINI) › Domestic investors › Insurance companies › Public funds – Pensions and Postal › Securities Investment Trust Enterprise › TAIEX listed companies which sponsor Depositary Receipts

26. 26 go to View, Header and Footer to set date Citigroup as Viewed by Clients and the Market Results for 2003/04 Best Bank in Asia, Awards for Excellence, July 2004 Best at Cash Management in Asia, Awards for Excellence, July 2004 Best at Investor Services in Asia, Awards for Excellence, July 2004 Best at Cash Management and Payments Globally, Awards for Excellence, July 2004 Ranked 2 nd Best Regional Trade Bank, Trade Finance Poll, September 2004 Best Cross-Border Corporate Cash Management Bank in Asia (>$500 million category), June 2004 Best Cash and Trade Finance House in Japan, April 2004 Best Corporate/Institutional Online Cash Management Bank in Asia Pacific, September 2004 Best Corporate/Institutional Internet Bank in China, Korea and Singapore, September 2004 Best Overall Bank for Cash Management, April 2004 Best Bank for Cross-Border Pooling and Netting in Asia, 2 nd year in a row, April 2004 Best Cash Management Specialist in Asia – Financial Institutions, December 2003 Best Bank/Best Commercial Bank in Asia, December 2003 CitiDirect® Online Banking ranks #1 Best Cash Management website (2nd consecutive year) Greenwich Associates, 2004 Cash Management Internet Benchmarking Study, May 2004 Best Global Custodian in Asia, Unweighted, May 2004 Best Global Custodian for Insurance Companies, Unweighted (global award), May 2004  Best in Class in Mutual Fund Administration Survey, June 2004  Best in Class in Hedge Fund Administration Survey, June 2004  Most Acclaimed Network globally – Top Rated or Commended in 95% of markets, January 2004  Top Rated in 13 countries in Asia – Australia, China, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, Pakistan, Philippines, Singapore, Taiwan, Thailand, December 2003

27. 27 go to View, Header and Footer to set date Why Citigroup? » One of the strongest financial services companies in the world » Largest proprietary sub-custodian network in the world » Most diversified product range of securities services in the world » Commitment to the custody business » Automation and technology » Focus on providing value-added custody services » Continuous improvement in service excellence » Consistently voted best in class in independent surveys » We are a relationship bank and view ourselves as partners to our clients