Funds distribution: Ripe for change

October 2018

Transforming and disrupting

2© 2018 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.Confidential information. For client presentation only.

Content areas

01 FundsDLT — Digital application for funds distribution

02 Use case ideation

01 FundsDLT — Digital application for funds distribution

4© 2018 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.Confidential information. For client presentation only.

— FundsDLT project was originally incubated by KPMG in Luxembourg before it extended its collaboration with Intech. Subsequently, Luxembourg Stock Exchange came onboard as a collaborator in the development and testing of the solution.

— FundsDLT is eliminating reconciliation within the affected processes, automating the protocols already being used and therefore subtracting the manual element. It is focused upon elimination of commissions for promoting private fund investments.— Investors and asset managers have a dedicated cash account.— Cash clearer holds and controls investor cash and initiates the transaction.— Does not hold any investor cash ― cash clearer is connected via API to FundsDLT.— Track status of the order from initiation to execution and closing.— Prevent scenarios of non-payment by investors to asset managers.

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Conception of Blockchain based funds distribution model

5© 2018 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.Confidential information. For client presentation only.

— FundsDLT offers various fund distribution models:— Direct to customer (D2C): Asset manager directly sells to investors— Business to business (B2B): Asset manager sells to distributors with no visibility on end clients— Business to business to customer (B2B2C): Asset manager sells to distributors and has a view on end clients.

— FundsDLT currently involves over 300 institutions in various roles divided across 19 user groups.— Natixis, BNPP and CACEIS are some major participants in the testing phase of FundsDLT.

Conception of Blockchain based funds distribution model

Nov 16 Dec 16 Jul 17 Jun 18 Dec 18 Q1 2019 2019

Nov 2016Prototype developed

Jul 2017First real blockchain transaction with Natixis

Q3 2019Sub TA functionalities

Dec 2016Commenced Testing (Phase I)

Prototype (Developed)

Prototype (Developed)

Dec 2018Minimum Viable Product

Dec 17

Dec 2017API transaction with BNPP

Go liveJune 2018Completion of 5 User Group sessions

6© 2018 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.Confidential information. For client presentation only.

Introducing FundsDLTFundsDLT’s story— KPMG in Luxembourh provided advisory services to the Luxembourg Stock Exchange and Intech who built and

launched FundsDLT.— The goal was to demonstrate that fund distribution can be digitalized with the blockchain technology.

Concept— Market fund order processing engine based on distributed ledger technology and smart contracts. — Processing and decentralization of the information for market players: asset managers, asset servicers and

investors.— Cost effective distribution channel for direct to investor (D2C).

Objectives

1

Provide an alternative distribution channel for asset managers to directly reach final investors.The long-term goals are:— To improve the fund distribution’s process efficiency.— To popularize investment funds in the general public by making them easily accessible.

Reduce cost of processing orders by increasing operational efficiency (suppressing reconciliations and data exchange) and mutualizing AML/KYC.

2

3

7© 2018 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.Confidential information. For client presentation only.

FundsDLT — Changing the fund distribution eco-system

The DLT provides a single source of truth with automatic exchange of data and no need for reconciliations across the value chain.

The Luxembourg Stock Exchange estimated that processing costs could be reduced by 60-70 percent due to the use of DLT and the rationalization of AML/KYC processes.

BankFund

custodian

Transferagent

Assetmanager

Userinterface

Cash CCP

Data hub KYC hub

OMSSmart

contract

TASmart

contract

Cash CCPSmart

contract

FundsDLT

8© 2018 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.Confidential information. For client presentation only.

FundsDLT — bringing added-value to the whole value chain

— Register transparency— New products— Direct access

to investors — Decrease costs

— Account management cost decrease

— Improved user experience

— Sales increase

— Digital & user friendly interfaces

— Cheaper products— Relevant products

— New value-added services

— Cost reduction

Assetmanagers

Distributors Assetservicers

Directinvestors

9© 2018 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.Confidential information. For client presentation only.

FundsDLT — demo

(click play to watch)

02 Use case ideation

11© 2018 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.Confidential information. For client presentation only.

Our development life-cycle leverages KPMG’s domain knowledge and collaboration partners’ technical capabilities

Solution development steps

Key tasks performed —Blockchain

learning—Use case

candidates—Sponsor

business solution

—Map current state

—Identify pain points

—Business case

—Confirm project

Education & qualification

Current & future state

Production

Development

—Regulatory and compliance controls

—Test planning and execution—Production systems review

MVP development

Blockchain solution

—Blockchain learning

—Use case candidates

—Sponsor business solution

—Map current state—Identify pain points—Business case—Confirm project—Coding &

development—Blockchain

architecture—Platform review

Strategic prioritization

Blockchain strategy

POC Prototype Pilot

—Develop MVP for early adopters

—Blockchain architecture

—Integration with legacy architecture

—Functional & Business requirements development

KPMG member firms services are subject to considerations/limitations that will be evaluated on case-by-case basis

12© 2018 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.Confidential information. For client presentation only.

The Use Case Selection Life Cycle Process is designed to survey, identify, qualify use cases for proof of concept and prototyping consideration.

Understand and evaluate existing industry use cases to determine applicability to the organization or to spark new use case ideas

Understand organizations’ strategic objectives and current state processes including pain points and risks to identify potential opportunity areas

Identify use case candidates based on use case identification criteria. Identify scenarios with high probability of being transformed through Blockchain

Apply qualification criteria to use cases to narrow and prioritize potential use case candidates

Select use case for development of proof of concept and/or minimal viable product/ prototyping

KPMG Lifecycle for use case selection

KPMG member firm services are subject to considerations/limitations that will be evaluated on case-by-case basis

Market view & reference existing industry use cases

Current state understanding & strategic objectives

Use case identification

Use case qualification

Use case selection

Eamonn MaguireGlobal Distributed Ledger Services LeadFinancial ServicesKPMG International T: +1 646 489 2073E: emaguire@kpmg.com

Contact

© 2018 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

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Funds distribution: Ripe for changeContent areasSlide Number 3Conception of Blockchain based funds distribution modelConception of Blockchain based funds distribution modelIntroducing FundsDLTFundsDLT — Changing the fund distribution �eco-systemFundsDLT — bringing added-value to the whole value chainFundsDLT — demoSlide Number 10Our development life-cycle leverages KPMG’s domain knowledge and collaboration partners’ technical capabilitiesKPMG Lifecycle for use case selectionContactSlide Number 14