J.P. Morgan Emerging Markets Learning Forums

J.P. Morgan Emerging Markets Learning Forums Forum 13: Key Market Nuances and Recent Developments Middle East S T R I C T L Y P R I V A T E A N D C O N F I D E N T I A L May 10, 2011

J.P. Morgan Emerging Markets Learning Forums J.P. Morgan Network Management has launched a series of Emerging Markets Learning Forums consisting of monthly client dial-in sessions covering key topics around investing in emerging and developing markets. Forums will address general nuances of emerging markets, such as market entry, account structure, trade settlement, foreign exchange and regulations. Alongside these general forums will be specific market forums, which will provide clients with the key characteristics on the mechanics of markets such as India and China along with expanding regions such as the Middle East and Africa. TODAY S FORUM May 10, 2011: Key Market Nuances and Recent Developments: Middle East This session will provide clients with an overview of the account structure used in 4 of the Middle East markets, e.g. Bahrain, Jordan, Qatar and UAE and will also provide a brief market overview of those markets. In addition, this forum will discuss the recent developments in Qatar and UAE around the introduction of DVP settlement mechanism. UPCOMING FORUMS: June 28, 2011: Key Market Nuances: Indonesia This session will provide clients with an overview of the Indonesian securities market and will also focus on the various developments surrounding taxation in this market. PAST FORUMS: Market Entry, Account Structure & Regulations ; Key Nuances of the Middle East ; Trading, Settlements & FX in Emerging Markets ; Key Nuances of India ; Corporate Actions and Tax in Emerging Markets, Key Nuances of Sub-Saharan Africa & Market Expansion ; Key Nuances of China A ; Key Nuances of Brazil ; Key Nuances of Eastern Europe ; Key Nuances of LATAM ; Key Nuances of Russia FUTURE FORUMS will cover the following topics: Taiwan Materials and conference numbers will be distributed approximately 1 week before each session. Sessions will be recorded and a replay will be available for 14 days after each forum. We welcome and encourage you to submit suggestions for future forum topics. Should you have any questions or suggestions, please contact network.client.consulting@jpmorgan.com. 1

Agenda Key Nuances of Middle East Markets Dual Account Structure Recent Developments in Qatar and UAE Market Overviews Bahrain Jordan Qatar UAE Key Nuances of Saudi Arabia 2

Middle East & GCC markets ), مجلس التعاون لدول الخليج العربية Arabic: The Cooperation Council for the Arab States of the Gulf (CCASG; also known as the Gulf Cooperation Council (GCC; التعاون الخليجي (مجلس is a political and economic union involving the six states of the Persian Gulf. The GCC countries include Kingdom of Bahrain State of Kuwait Sultanate of Oman State of Qatar Kingdom of Saudi Arabia United Arab Emirates Middle East markets as currently supported by J.P. Morgan: GCC countries Jordan Lebanon Palestine 3

Key Nuances of Middle East Markets 1. No True DVP: Most Middle East markets do not have a concept of true DVP and do not have simultaneous and irrevocable transfer of securities and funds. Stock often moves on TD while cash moves on SD (except NASDAQ Dubai (non-equity) and Saudi Arabia). 2. Limited control by the subcustodian over client s securities: Another unique feature of some of these markets except for Lebanon is the inter-linkage of the trading and depository systems. Execution of a sale results in the stock moving from the seller to the buyer without the authorization of the subcustodian. Note: There will be greater control for the subcustodian with the recent / upcoming changes in Qatar and UAE. 3. Dual account structure: Some markets operate with a Dual Account Structure whereby clients are required to open a custody as well as a trading account. Securities have to be available in the trading account before a Sell trade can be executed. Brokers can access securities that are held in the trading account. For purchases, securities are therefore automatically moved from the trading account to the custody account on settlement date. 4. No Failed Trades: Most of the markets (excluding NASDAQ Dubai) do not have a concept of fail trades. Given that these markets were driven by retail participants, the stock exchanges imposed strict controls on market settlement. Hardly any of these markets have a buy-in mechanism yet (except Kuwait, Lebanon and Jordan and new for Qatar and soon for UAE) and as such do not allow failed trades. The markets in the region have been talking about introducing a failed trade mechanism and allowing short selling in the future. 5. Trading week different from international markets: Most markets in the Middle East practice a Sunday Thursday week with Fridays and Saturdays as weekends. In such cases, purchase trades executed by clients on Wednesday, following a T+2 settlement, will settle on Sunday and thus need to be funded by Thursday. Saudi Arabia has a Saturday Wednesday trading week. Repatriations are executed on Mondays instead of Fridays as the markets are closed. 4

Key Nuances of Middle East Markets 6. Trading on-exchange: Trading in most Middle East markets mainly takes place as on-exchange activity only, i.e. there are no OTC markets for securities. 7. Availability of instruments: There is only limited availability of fixed income instruments in the Middle East markets. Equities are the most common instrument. 8. Corporate Actions: Most of the announcements and disclosures made by companies in the Middle East are in Arabic. Whilst this is changing and announcements in markets such as UAE and Bahrain are received in English, a sizeable proportion of them are still being announced in Arabic. In addition, regulation around Corporate Actions do not tend to be very clear, e.g. the concept of pay date does not exist as such. 10. Lack of Straight through processing (STP): Fax, letters and e-mails are the commonly accepted communication mediums in the markets across the Middle East. Generally, institutional brokers do not have BIC codes and most of the depositories and exchanges are not SWIFT compatible. The market infrastructure does not support STP and is prone to manual intervention, although J.P. Morgan s subcustodian s systems are SWIFT compliant and have high STP capabilities. 11. Security Identification: There is no single common security identifier applicable across all Middle East markets. ISINs are recognized Lebanon, Jordan and UAE markets, whereas the rest of the markets identify securities through market symbols. Every exchange has its own unique nomenclature for stock symbols. In order to aid straight through processing, J.P. Morgan s subcustodian allots internal dummy ISINs. 12. Account opening for non-incorporated entities: Historically, there have been issues with account opening for non incorporated entities. Whilst this has improved through lobbying and education about global investment vehicles, clients may still experience some delays in account openings for certain types of investment vehicles. 13. Account Name changes: Lack of experience with name changes and difficulties with recognition of official documents that are needed to prove change of account name. 5

Agenda Key Nuances of Middle East Markets Dual Account Structure Recent Developments in Qatar and UAE Market Overviews Bahrain Jordan Qatar UAE Key Nuances of Saudi Arabia 6

Dual Account Structure As the nominee concept is not fully recognized in the Middle East markets at this time, clients are required to open segregated securities accounts in the full legal name of the beneficial owner at the subcustodian. Clients also hold their own segregated securities account at the respective Central Securities Depository in the market. Cash accounts are maintained at omnibus level in Jordan, Lebanon, Oman, Qatar, Saudi Arabia and UAE; segregated cash accounts are operated in Bahrain and Kuwait. Across several markets in the Middle East, clients have to operate with a dual account structure consisting of: A segregated custody account in the name of the beneficial owner A trading account in either the name of the Subcustodian or the broker The markets where such dual account structure exists, are: Bahrain Jordan Qatar United Arab Emirates 7

Dual Account Structure The account structure is such that in the UAE and Qatar the Trading Account is opened on the books of the Subcustodian, HSBC. In the case of Bahrain and Jordan, the Trading Account is opened on the books of the actual broker. BUY: Purchase trades settle in the trading account of the subcustodian / broker. J.P. Morgan has a standing instruction with the subcustodian: when securities are purchased and settled in the subcustodian s client trading account, they are then immediately transferred to the client s segregated custody account. Where stock settles in the broker account (i.e. in Bahrain or Jordan), the broker is responsible for instructing the move to the client s segregated custody account at the subcustodian. SALE: In order to sell the securities, shares need to be transferred to the trading account prior to trade execution. The broker cannot execute a trade on the stock exchanges unless the stock resides in the trading account. Once in the trading account, the broker has access to the securities and is technically in a position to sell the securities held there. There are three options for clients to move securities between the custody account and the trading account: 1) Pre-Trade Transfer Instruction 2) Broker Authorization Standing Instructions 3) A third alternative of keeping securities in the trading account is available for Qatar and UAE 8

Dual Account Structure Qatar & UAE Bahrain & Jordan Local brokers can access securities held in client trading accounts, therefore, to mitigate this direct broker exposure, J.P. Morgan has issued standing instructions to move all purchased securities immediately upon settlement from the client's trading account to the client's custody account. In order for a local broker to sell securities on behalf of a client, securities must be transferred from the client s custody account to the HSBC client trading account. 9 For purchases, the local broker completes a transfer form to transfer the settled securities from the client's trading account with the broker to the client's custody account. This transfer constitutes broker to custodian settlement for securities and ensures the purchased securities do not remain under the direct control of the local broker in the client's trading account. Clients are strongly recommended to seek confirmation from their broker that this transfer will be undertaken on settlement date.

Dual Account Structure Transfers between trading and custody accounts 1) Pre-Trade Transfer Instruction to advise the subcustodian to move securities from the custody account to the trading account J.P. Morgan has a standing instruction in place with our subcustodian so that when securities are purchased and settled, they are automatically transferred to the client's custody account. In order to sell, the securities need to be transferred back to the trading account prior to trade execution. In advance of trading, clients should provide J.P. Morgan with an authenticated message to transfer securities from the custody to the trading account via either MT599 or facsimile. This pre-trade transfer instruction must be received by 17:00 local time 1 business day prior to Trade Date (T-1) for all clients instructing Bournemouth. Shares are moved the next business day (T) local time (pre-trading) in order for the shares to be available for trade execution. Once the trade has been executed, clients will also need to provide J.P. Morgan with the normal settlement instruction. Clients are reminded to include any FX repatriation instruction on the actual settlement instruction to follow. Pros: Only J.P. Morgan and its subcustodian are authorized to move securities from the custody account to the trading account, i.e. there is greater control over the movement of securities. Cons: Clients have to provide the pre-trade transfer instruction one day prior to trading and are therefore unable to sell immediately if required; thus, there is less trading flexibility. Manual intensive process involving MT599/Fax. 10

Dual Account Structure - Transfers between trading and custody accounts 2) Broker Authorization Standing Instruction to be put in place with the subcustodian to perform the movement between accounts upon request from authorized brokers S L E A R N I N G F O R U M: M I D D L E E A S T J.P. M O R G A N E M E R G I N G M A R K E T S The standing instruction option allows clients to designate specific brokers that can request the subcustodian to move shares between the custody account and the trading account. Pros: The standing instruction eliminates the need to pre-advise one day prior to the sales transaction. Normal procedure is for the broker to contact the subcustodian in the evening prior to trade date (or prior to 7:30am local time on trade date) to instruct the movement of securities to the trading account. Cons: The reliance is with the broker to instruct the subcustodian on a timely basis. The agent needs to verify the authorized signatures (at the broker level) to ensure that the instructions are correct, i.e. maintenance of authorized brokers is required. SWIFT instructions are preferred. Indemnity letter required. 11

Dual Account Structure - Transfers between trading and custody accounts 3) Keeping securities in the trading account on a permanent basis Pros: This option is only available for Qatar and UAE Easier trading access for the client. No need to pre-advise or move securities from the custody account prior to trading, i.e. no operational impact. Clients have the ability to trade at any time. Cons: Authorized brokers, i.e. brokers with whom the client (or their global broker) has a relationship, have access to the trading account and therefore there is the possibility that securities can either be erroneously or fraudulently sold. However, with the recent changes around the DVP settlement mechanism in these markets, the subcustodian is given greater control over the securities and is able to reject unmatched transactions or error trades. Indemnity letter required. Additional points to consider There are some examples to date of erroneous trades on the DFM and ADX markets. However, there are no examples to date of a broker attempting fraud by selling securities to make financial gain or to manipulate the market. Normal procedure is for the broker to correct an error trade by reversing the transaction on the same day. However, if the broker fails to do this, the subcustodian will identify the error through the pre-matching process. With the recent changes in the UAE and Qatar, the subcustodian will have the right to reject trades. For Qatar and UAE, the subcustodian operates with an HSBC Client Trading Account, which reflects all activity in the client s underlying trading accounts with local brokers. The subcustodian is therefore able to monitor closely any erroneous trading activity that might occur across the client trading accounts. 12

Agenda Key Nuances of Middle East Markets Dual Account Structure Recent Developments in Qatar and UAE Market Overviews Bahrain Jordan Qatar UAE Key Nuances of Saudi Arabia 13

Recent Developments in Qatar and UAE DVP settlement model The Qatar Exchange (QE) and the UAE exchanges recently published details regarding the new DVP settlement model. The go-live date was May 2, 2011 for Qatar and will be May 29, 2011 for the UAE (ADX, DFM, NASDAQ equities). Purpose of the DVP model MSCI Emerging Market status To provide subcustodian with greater control over assets The key highlights of the DVP model The subcustodian will have the ability to accept/reject trade settlement (purchase or sale) by accepting or passing the settlement obligation to the respective local broker (subject to matching). In the event that a purchase or sale is unmatched at settlement deadlines, the subcustodian will then reject the transaction. A late confirmation period will exist (UAE: T+2 to T+4 Qatar: T+3 to T+6) Enables clients to settle late with agreement by the broker Broker has option to dispose of securities from a rejected buy and can buy back securities for a rejected sale A buy-in mechanism will be introduced to address settlement failures. Qatar: daily for 30 minutes prior to market opening and from T+4 to T+6. Settlement is T+0. UAE: daily for 15minutes from 2.15 p.m. to 2.45 p.m. Settlement is T+0. Cash close out exists if buy-in is unsuccessful 14

Recent Developments in Qatar and UAE The key highlights of the DVP model (ctd) Error trades will still exist, however these transactions can be rejected by the subcustodian In practice, errors corrected on T or T+1 Sale trade errors could result in cash close out Corporate actions: For rejected transactions, corporate entitlements will need to be claimed from the broker. Impact to clients Timeliness of settlement instructions and FX / funding Investors will be able to request their assets to be held in the trading account permanently. This will avoid the need for broker authorization standing instructions and pre trade transfers. Clients should further note that J.P. Morgan will take no action unless instructed, and the current model will continue to operate broker authorization standing instructions and pre trade transfers. There will be reduced broker risk however clients should note that broker access is still prevalent. No change to settlement instruction formatting or instruction deadlines. A NIN is still required to trade Late settlement fines (TBC) Clients may wish to amend their broker agreements as to terms around settlement within the late confirmation window 15

Recent Developments in Qatar and UAE Rejected Purchase Settlement Flow (DFM) Custodian rejects trade and inform the local broker and DFM by 7 p.m. on T+1 DFM confirms the rejection of trade by 9am on T+2 Broker pays for the rejected trade by 10 a.m. on T+2 Yes HSBC will pay the local broker the cash proceeds and the broker will request the DFM to transfer the securities back to the client s Agent Trading account DFM credits the shares into the broker s security account by 10.15 a.m. on T+2 T+2 up to T+4 Once matched settlement instructions are received from the client, HSBC will then approach the local broker and inform them the client s willingness to settle the rejected transaction Local broker accepts late confirmation 16 No Local broker can sell the shares in the market

Recent Developments in Qatar and UAE Rejected Sale Settlement Flow (DFM) Custodian rejects trade and inform the local broker and DFM by 7 p.m. on T+1 DFM confirms the rejection of trade by 9 a.m. on T+2 and checks for availability of shares in the local broker s account Yes DFM debits the brokers security account and pays for the rejected trade on T+2 Securities Available Yes Inform the DFM who in turn will receive the securities from the client s Agent Trading account and pay the settlement proceeds to the local custodian No Or Or Late confirmation window once matched settlement instruction is received from the client, HSBC will approach the local broker and inform them the client s willingness to settle the rejected transaction 17 Local broker accepts late confirmation No Buy-in Mechanism Or Broker purchase shares from the market and DFM settles cash with the broker

Agenda Key Nuances of Middle East Markets Dual Account Structure Recent Developments in Qatar and UAE Market Overviews Bahrain Jordan Qatar UAE Key Nuances of Saudi Arabia 18

BAHRAIN Market Participants Subcustodian: HSBC Bank Middle East Ltd Depository: The Clearing, Settlement and Central Depository (CDS) Exchange: Bahrain Stock Exchange (BSE) Regulator: Central Bank of Bahrain (Capital Markets Supervision Board) Central Bank: Central Bank of Bahrain (CBB) Portfolio Services & Tax Proxy Voting: Voting is permitted in Bahrain. Voting is arranged through subcustodians, however, it should be noted that whilst voting is offered to clients, the actual experience of foreign investors voting is virtually non-existent. Corporate Actions: The most common types of Corporate Actions are Bonus Issues and Dividends. Other Corporate Actions in Bahrain are rare and the overall Corporate Event structure is relatively new in the market. Tax: There are no taxes applicable to Foreign Investors in Bahrain. Account Structure Segregated Cash and Securities accounts are opened on the books of the subcustodian and the Central Security Depository (CDS) (Registry Accounts). Clients need a NIN (local investor ID) before trading in the Bahrain Market. Securities are traded in broker trading accounts, though remains under the ownership of the registered client s NIN at all times. Lead time to account opening: 8-10 days Timing of Good Title & Good Funds Good title is received on settlement date on the records of the CDS after payment has been made no later than settlement date 10:00 am local time. Good funds are received on settlement date up to three days after securities have been transferred under the control of the local broker on or before Trade Date. This results in up to 2/3 days exposure to the broker. Ownership remains with the client (on the sell side) but the broker has direct control over client s assets when they are in the broker trading account. Once a trade is executed, the shares are blocked in the account by the CDS and not released until Settlement Date. Cash & Foreign Exchange Bahrain Dinar (BHD) Bahrain maintains an exchange rate peg at 0.376 Bahraini dinars to the US dollar. Agent FX market; third party FX not supported. (Third party payments possible for Non Securities related transactions). There are no foreign exchange restrictions. Overdrafts and balances are permitted. No repatriation restrictions. No FX reporting requirement. Foreign Ownership Limits & Disclosure FOL: 10% individual foreign ownership limit. Overall Limit is 49% for all investors, however, companies can allow up to 100%. Brokers are responsible for checking FOL limits before trading. Only 2 out of 50 listed companies are not available to foreign investors. Disclosure is required before placing the order which would reach 5% to the Bahrain Stock Exchange (BSE). Any subsequent 1% increase/decrease from the 5% level must also be advised by the investor to the Central Bank of Bahrain (CBB). Where an investor acquires 10% of a listed company, such acquisition must be preapproved by the prior to the execution by the CBB. Settlement & Buy-ins Settlement occurs on T+2 Securities have to be dematerialized for trading, but can be held in physical form after settlement. Free of payment transfers are not permitted except for FOP Same Beneficial Owner transfers with prior approval. For purchases upon settlement, securities are moved from the broker trading accounts to the custody account in the name of the client. For sales, securities must be transferred or be in the relevant brokers trading account on TD for the trade to be executed on the exchange. Buy-ins are possible from T+3 to T+4 but the trade can still settle (with penalties). If the trade is still outstanding on T+5, it will go through the Auction Close-out process. The Buy-in / auction process is controlled by the Exchange. Special considerations Recent & Future Developments Clients should be aware that securities being sold are held in the broker account from Trade Date through to Settlement date giving significant exposure to the broker during the trading and settlement process. Ownership remains in the client s name as per CSD records until settlement date when re-registration is performed and payment is made. A new exchange called Bahrain Financial Exchange became operational during Q2 2010 and will list Islamic products and commodities. Following a decree announcing the privatisation of the BSE, it is expected that the roles of the CSD and Exchange will be split into 2 separate entities. J.P. Morgan is closely monitoring the market including all developments resulting from the unrest in the region. During the unrest in the country, the market remained closed for 1 day, with disruption in financial sector for 2-3 days

JORDAN Market Participants Subcustodian: HSBC Bank Middle East Limited Depository: Securities Depository Center (SDC) Exchange: Amman Stock Exchange (ASE) Regulator: Jordan Securities Commission (JSC), Central Bank of Jordan Central / Clearing Bank: Central Bank of Jordan Timing of Good Title & Good Funds Good title is received on settlement date when the broker moves securities to the buyer s account (T+2); however evidence of good title is only received on the next business day when the custodian receives a statement of client holdings from the SDC (T+3). Good funds are received on settlement date. However as broker to broker settlement occurs on T+2, title is given up one day prior in order to facilitate broker to broker settlement, resulting in overnight exposure to the broker. Account Structure Segregated securities account structure for securities on the books of the subcustodian as well as at the CSD. Omnibus account structure for cash. Client Trading Account required with local broker. Lead time to account opening: 1 week Portfolio Services & Tax Proxy Voting: POA required from client; Intention to vote by proxy must be registered with companies at least three days prior to the annual general meeting. Company shares are suspended from trading on the day of the AGM and are not permitted to resume trading until AGM+1. Corporate Actions Bonus shares and Rights issues still prevail in the market, although Bonus issues are more common. Any Bonus or Rights issue is announced in a local newspaper, usually Al'ra (main business newspaper) or Al Dostour. The announcement is made 15-10 days before the AGM where the final distribution of any Bonus or Rights issue is approved. Prior to actual distribution, the JSC and the Ministry of Commerce and Trade must approve the issue. Tax: There are no taxes applicable to Foreign Investors in Jordan. Cash & Foreign Exchange Jordanian Dinar (JOD). Since 1995, the JOD has been fixed against the USD (impact of USD holidays on the ability to book FX). Agent FX market; third party FX not supported. There are no foreign exchange or repatriation restrictions Long balances are permitted, however, no interest is paid. Overdrafts are not permitted. No FX reporting requirement. Foreign Ownership Limits & Disclosure FOL: Non-Jordanian investors are treated as Jordanian investors under Article 24.B Investment Promotion Law 16 (1995). Foreign Investment is limited to an aggregate maximum of 50 per cent of any one company's share capital in the following sectors: Retail and Services & Trade (Construction and Contracting) Disclosure: 5% and then further investments or disinvestments of 1% or more until 10%. At 10% or investors are required to disclose in writing to the JSC the reason for the size of the stake. Settlement & Buyins Settlement occurs on T+3 (Sunday to Thursday). Securities are dematerialized. Free of payment is permitted if agreed with the local broker for broker to custodian settlement. On T+1, the subcustodian receives copy of trade invoice from the local broker and compares/matches the details to J.P. Morgan's trade instruction. Broker to Broker settlement occurs on T+2, whereas Broker to Subcustodian settlement occurs on T+3. For sales on T+0, client s assets are blocked within the trading account at the SDC and do not receive cash settlement until T+3. In the event that a selling broker does not have sufficient stock to deliver in their client s position on T+0 at 3:00pm, then they must buy in the shares from another broker on T+1. In the event that by the morning of T+2 the selling broker has not been able to buy in the shares, then the SDC will initiate a buy-in on T+2 to cover the failing transaction. Recent & Future Developments In March 2009, the ASE upgraded its trading system to the new version of the electronic trading system NSC V900. The enhancement will improve the system capacity and the efficiency of placing orders, as well as allow the ASE to develop further analysis on market information and surveillance requirements. The upgrading of the trading system is also expected to improve transparency in the securities market and is seen as the first step in integrating the trading and settlement systems between the ASE and SDC.

QATAR Market Participants Subcustodian: HSBC Bank Middle East Limited Depository: Qatar Exchange (QE) as Central Registry Exchange: Qatar Exchange (QE) Regulator: Qatar Financial Market Authority (QFMA), Central Bank of Qatar Central / Clearing Bank: Qatar Central Bank Portfolio Services & Tax Proxy Voting: Trading of the security is suspended on the day of the AGM and resumes the following trading day. Market practice is to vote by physical attendance. According to the Commercial Law of Qatar to vote as proxy, the proxy has to be a shareholder of the company. Due to these restrictions, J.P. Morgan's subcustodian is unable to act as proxy in Qatar. Corporate Actions: The market has not yet experienced any significant volume in Corporate Action activity. There are no standard procedures for the distribution of securities / cash and the QE does not currently insert itself into the process. Tax: There are no withholding taxes on dividend income for equities. Capital Gains Tax (CGT) is applicable on QE trading activity by non-qatari institutional investors up to a rate of 35% depending on the level of taxable income. However, at present tax is not being levied on foreign institutional investors due to no clear mechanism in place for assessing or collecting the tax in respect of trading taking place on the QE. Account Structure Segregated securities account structure for securities on the books of the subcustodian as well as at the CSD. Omnibus account structure for cash. Lead time to account opening: 8 10 days Timing of Good Title & Good Funds Good title is received on settlement date shortly after payment has been made. This results in minimal exposure both to the local broker and also the market settlement system. Good funds are received on settlement date after title lost on T. This results in 3 days exposure to the local broker, settlement bank and the market settlement system until funds have been received. Cash & Foreign Exchange Qatari Riyal (QAR) Agent FX market; third party FX not supported. The Qatari Riyal is pegged to the USD at 3,6415 and has remained at this rate since 1999. There are no foreign exchange or repatriation restrictions. Long balances are permitted, however, no interest is paid. Overdrafts are not permitted. No FX reporting requirement. Foreign Ownership Limits & Disclosure FOL: Individual company limits vary according to individual company articles. Expatriates and non-residents are permitted to own shares in all QE listed companies up to an aggregate limit of 25% of available capital. Disclosure: No disclosure requirements prevail in Qatar. Settlement & Buy-ins Settlement occurs on T+3 Securities are dematerialized. Free of payment trades are not permitted. On T+2, the subcustodian matches the confirmed final trade details with the contract note received from the broker and the QE transaction report. Failed trades are not permitted on the QE.*NB DvP model effective May 2, 2011. Special considerations Recent & Future Developments The initiatives currently being worked on by HSBC, the QE and QFMA are as follows: Ongoing development of a SWIFT interface between HSBC and the DSM to enable participation in the local market settlement process with a greater degree of straight through processing (STP). HSBC now directly involved in the QE cash settlement process with the QE s clearing bank (Qatar Central Bank) as opposed to previous process whereby HSBC settled cash proceeds with local brokers. This initiative has reduced the client's exposure to local brokers with respect to sale proceeds. Go live in line with DVP model.

UAE Three market comparison DFM & NASDAQ Equities ADX NASDAQ Dubai (Fixed Income) Settlement period T+2 T+2 T+3 Trading week Sun-Thurs NB NASDAQ Equities settle Mon-Thurs Sunday-Thursday Sunday-Thursday; settlement Mon-Thur Settlement currency AED / USD for NASDAQ Equities AED USD Central Depository Dubai Financial Market (DFM) - Clearing, Depository, and Settlement department (CDS) Abu Dhabi Securities Exchange (ADX) - Clearing, Depository, and Settlement department (CDS) NASDAQ Dubai - Central Securities Depository & Registry department Stock Exchange Dubai Financial Market (DFM) Abu Dhabi Securities Exchange (ADX) NASDAQ Dubai Limited (NASDAQ Dubai) Name of Regulator Central Bank of the UAE, Securities and Commodities Authority (SCA) Central Bank of the UAE, Securities and Commodities Authority (SCA) Dubai Financial Services Authority (DFSA) Trading Hours 10 a.m. 2 p.m. (local) 10 a.m. 2 p.m. (local) 10 a.m. 2.p. m (local) Timing of good title 10 a.m. on SD / 10.15 a.m. on SD *post DVP 9 a.m. on SD / 10.15 a.m. on SD *post DVP By 5.15 p.m. on SD Timing of good funds (buys) 11 a.m. on SD / 10.00 a.m. on SD *post DVP 12 p.m. on SD / 10.00 a.m. on SD *post DVP By 4.30 p.m. on SD Pre-Matching Manual pre-matching between client s instruction and broker s contract note on T+1; trade affirmation to DFM on T+1 by COB. Manual pre-matching between client s instruction and broker s contract note on T+1; trade affirmation to ADX on T+1 by COB. Pre-matching between client s instruction and broker using the depository s system. Asset Identification code Broker requirements ISINs are not used in the market, but HSBC uses ISINs to have STP with foreign investors. Client trading accounts are opened with the local broker. Securities must be moved to the trading account prior to a sale transaction. Broker agreements required. International Brokers are not recognised in the UAE. ISINs are not used in the market, but HSBC uses ISINs to have STP with foreign investors.. Client trading accounts are opened with the local broker. Securities must be moved to the trading account prior to a sale transaction. Broker agreements required. International Brokers are not recognised in the UAE. ISIN codes are used. All trades must be executed via broker members of NASDAQ Dubai. Membership can be remote. Registration Title is effected immediately on books and records of DFM - CDS at point of settlement. Title is effected immediately on books and records of ADX - CDS at point of settlement. Title is effected immediately on books and records of NASDAQ Dubai at point of settlement. Account structure Is credit interest available? Segregated securities account and omnibus cash account. There is no interest paid in the UAE. Segregated securities account and omnibus cash account. Segregated securities account and omnibus cash account. There is no interest paid in the UAE. There is no interest paid in the UAE. Foreign Exchange There are no foreign exchange or repatriation restrictions. There are no foreign exchange or repatriation restrictions. There are no FX or repatriation restrictions. Overdrafts Overdrafts are not permitted. Overdrafts are not permitted. Overdrafts are permitted. Buy-ins / Failed trades There are no buy-ins in the DFM market. NB new DVP model introduces buy-ins There are no buy-ins in the ADX market. NB new DVP model introduces buy-ins At the end of SD+2 initiated by NASDAQ Dubai. Taxation There are no taxes in the DFM market. There are no taxes in the ADX market. Tax advisor recommended.

Agenda Key Nuances of Middle East Markets Dual Account Structure Recent Developments in Qatar and UAE Market Overviews Bahrain Jordan Qatar UAE Key Nuances of Saudi Arabia 23

Saudi Arabia Saudi Arabia unlike other Middle East markets is not available to all investors. Currently, the market offers the following investment options: Foreign Investors are able to gain equity exposure through Local Mutual Funds (individual holdings must not exceed 10%). Foreign Investors are able to access the local Treasury Bill Market. Local Investors or GCC Nationals can gain access to all instruments in the local market The Saudi Stock Exchange (Tadawul) launched an ETF (Falcom Saudi Equity ETF Fund) on the exchange on Sunday March 28, 2010. The new instrument is listed under a new sector which is called "Exchange Traded Funds". According to Tadawul, non-resident foreign investors are allowed to trade ETFs in the secondary market through authorised brokers. Foreign investors are not currently permitted to invest in equities; however Tadawul to liberalise the market further. Firm dates are yet to be confirmed. As per the other Middle East markets, a NIN is required before trading and the market operates a segregated account structure. The Saudi Market is open from Saturday Wednesday. Pre-funding is a general requirement for clients trading in Local Mutual Funds or for clients trading directly. The market operates on a T+0 basis for direct trading, T+2 for Government Debt and Local Mutual Funds Agent FX supported currency. Ownership of title for local mutual funds is driven by the books of the Registrar (i.e. local bank) administering the particular mutual fund; there is no single central register of such ownership holdings. Records are received into J.P. Morgan s subcustodian on a frequent basis to confirm ownership. J.P. Morgan Network Management Due Diligence Trip to the market scheduled for Q2 2011. 24

Agenda Key Nuances of Middle East Markets Dual Account Structure Recent Developments in Qatar and UAE Market Overviews Bahrain Jordan Qatar UAE Key Nuances of Saudi Arabia 25

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