SAFE KEEPING RECEIPT

In this forum and in offers and requests my network has come accross the term
safekeeping receipt often and I want to describe our knowledge about the topic and the
reason for our refusal to handle them directly. All I am saying may just not be what you
believe is right and true, so view it as a personal opinion even if it reflects the view and
policy of our whole network.

A Safekeeping Receipt is not in itself a technical term in the financial world, so it has no
fixed customary or defined meaning in the financial sphere we as Sapphire capital
Network populate.

It seems to possibly describe 2 seperate situations:

a. A negotiable, bank-issued certificate representing ownership of stock securities by an

investor. An international depository receipt, or IDR, is the non-US equivalent of an
American Depository Receipt. These instruments have been used since the 1970's to
facilitate international trading in securities. The securities backing the receipt remain in
the custody of the issuing bank or a correspondent bank. It usually descibes the securities
in their screen features, includes specific terms and conditions as they relay to the bank
responsibily and carry a compliance reference number which does allow a direct
screening. They, the depositary receipts, are securities.

b. A negotiable or non-negotiable bank-issued certificate representing the holding or

ownership of an asset, such as art, precious metal, jewelry, mining rights, specific
certified rights, everything a bank can hold. In a negotiable form typically issued for cash
value market assets, in a no negotiable form for documentary purpose issued without a
value assignement, the bank usually certifies what they hold, the terms and conditions of
the holding and for whom they are holding, which insurance is covering risks and their
own liability towards the beneficiary.

Under above a. the depositary receipts are not usually a problem as long as they are
issued for exchange traded securities, however they do not allow the creation of
derivatives easily, so you can not strip the securities, use them for seperate call and put
structures and can create legal compliance problems in regards of origin if they are the
result of a pool facility. The problem starts when they are created for the representation of
non-exchange traded securities. You have to look into the basic details of such securities,
their handling restrictions and details, possible tax and trade related problems in regards
of the relation between the related country and yours and so on. Since the work has to be
done anyway, the depositary receipt seems to us a waste of money and time. If you look
at the depositary receipt of a bulk portfolio of secondary bank obligations in a private
placement structure which may be linked to a specific project, the whole process can
create even more problems than a direct approach.

Depository receipts in relation to the case a. so far made only sense to us in very
restricted circumstances where we would not engage in the country for any services.
In regards of the variation b.) the safe keeping receipt is actually a sort of a bank asset
escrow where the bank certifies to hold the asset either for the owner or if negotiable for
the owner of the certificate. The problem is here as well that the value of the asset and it
modus of transfer does establish the value. Since the bank will refer to a third party for
the evaluation and normally includes an insurance such certificate is not "clean". So if
you go through the hazzle there you can do it without the bank as well, but cheaper and
faster.

For securitization it may make sense to follow such a procedure but even then there are
cheaper and easier ways around the paper related problem.

In addition in some countries there are legal problems in regrds of transfer, holding and
escrow as well as trust facilities which are normally established.

Given this, frankly a safekeeping receipt in my view is not worth the hazzle.