Account Structure in KSEI ACG Cross Training Bangkok

Account Structure in KSEI ACG Cross Training Bangkok, 27 -28 June 2006 KSEI – Kustodian Sentral Efek Indonesia (ICSD – Indonesian Central Securities Depository)

Outline • Introduction – KSEI in Indonesian Capital Market – Scripless Implementation Background • KSEI Participants • Collective Custody – Regulation on Accounts and Sub Accounts • • • Account Type & Structure Indirect Account Sub Accounts Benefit & Advantage of Sub Accounts Investor Types Account Details & Maintenance Transactions in C-Best Corporate Action (Entitlement & Distribution) Securities Holder List Issues Conclusion

Introduction - KSEI in Indonesian Capital Market Ministry of Finance Capital Market Supervisory Agency (BAPEPAM) Stock Exchange : Jakarta Stock Exchange Surabaya Stock Exchange Scripless Trading Indonesian Clearing and Guarantee Institution PT KPEI Clearing-Netting SRO (Self Regulatory Organization) Indonesian Central Securities Depository PT KSEI Book-entry Settlement

Introduction - Scripless Implementation Background • • Began in July 2000 Fully Scripless since June 2002 C-Best (Central depository and Book Entry Settlement System) Stock Exchange settlement performed Electronic-Based Time Frame Settlement (T+3) : since September 2002 OTC transaction & Settlement Automatic transfer of securities ownership by book-entry Automatic Corporate Actions process • Actual Data (as of 31 May 2006) : Total Participants : 167 entities (148 Brokers, 19 Bank Custodians) Total Issuers : 437 entities Total Securities instruments : 667 (384 shares, 240 corp. bonds, 24 Warrants, 2 Rights, 11 MTN, 6 PN) Total Asset (value of all securities recorded) : 583. 303 Billion IDR : 63. 080 Trillion USD

KSEI Participants • KSEI Participants are : - Brokers (Securities Companies) - Custodian Banks - Other parties approved by Bapepam (The Capital Market Supervisory Agency); ð KPEI for the function of Stock Exchange Transaction Settlement ð Foreign CSDs for cross-border settlement As of 31 May 2006 : 167 Participants 148 Brokers 19 Custodian Banks • Investor opens a securities account in Securities Company or Custodian Bank

Collective Custody Electronic Records KSEI ASII 10000 ISSUER / REGISTRAR ICSD / KSEI BROKER/ CUSTODIAN BANK Merrill Lynch ASII 2000 Morgan Stanley ASII 1500 ING Baring ASII 3000 Bankers Trust ASII 500 HSBC ASII 2000 Northern Trust ASII 3000 Scrip Records CITIBANK ASII 2000 Chase Goldman Manhattan ASII 2000

Collective Custody Legal Basis • Law Number 8 Year 1995 of The Republic of Indonesia regarding Capital Market Fungible : Securities In Collective Custody issued by the same Issuer are interchangeable with and equivalent to other Securities of the same type and class Under the name of CSD : Securities in Collective Custody at a Central Securities Depository shall be recorded in the Issuer’s registry of Security-holders in the name of the Central Securities Depository as the representative of its account-holders Segregation of assets : Securities Companies must comply with BAPEPAM Rules upon accepting clients’ Securities and must : a. register clients’ Securities in accounts that are separate from own accounts ; and b. maintain secured facilities for safekeeping clients’ assets, under separate records for each client.

Collective Custody BAPEPAM Rule No. III. C. 7 regarding Sub Account at ICSD : • • Client Investor is the recognized holder of securities account at Participant is a Securities Company or Custodian Bank that has opened a securities account at KSEI A sub securities account is the securities account of each client recorded in the Participant’s security account at KSEI Participant is obligated to : • open a sub account in name of each client • record client owned securities in respective sub accounts • assure accuracy of client securities balance (internal vs ICSD data ) • assure accuracy of client identity (internal vs ICSD data ) • KSEI is obligated to : • hold separate administration for the recording of securities in each sub securities account • deliver daily reports on the position of sub security accounts to respective Participants • KSEI only maintains contact with and is responsible to respective Participants pertaining to the administering of Sub Securities Accounts • Investor has the right to check the accuracy of the report concerning the balance of securities he owns (data at Participant vs data at ICSD)

Account Type Broker B delivery account Broker A delivery account Custodian Bank X receipt Account Own Deposit account Lending & borrowing Client Dep Account 1 Collateral account Client Dep Account 2 Own Deposit account Client Dep Account A Client Dep account B receipt Account Lending & borrowing Collateral account Own Deposit account Client Dep account X Client Dep account Y Client Dep account Z

Account Structure KSEI Custodian Bank Broker Non Clearing Member Depository Acc Cash Sec KPEI Depository Acc Cash Sec Delivering Acc Sub Acc Cash Sec Receiving Acc Cash Sec Collateral Acc Cash Sec L & B Acc Cash Sec Sub Acc Cash Sec Issuer Registrar Depository Acc Cash Sec Payment Bank Nostro Acc Cash Sec

Indirect Account • Investors own accounts at Brokers / Custodians • Brokers / Custodians possess their own accounts and their clients’ accounts at KSEI Request & Docs Verify Process Archive Brokers/ Custodians Investors Confirmation • KSEI holds separate administration for the recording of securities in each sub securities account There is No Omnibus Account

Securities Recording on Accounts Account Holder : Br 1 Own KSEI Sec. A Sec. B IDR Account Holder : CB 2 Cust. A Cust. B Sec. A Sec. D IDR Sec. C Sec. D IDR Own Sec. A Sec. B IDR Cust. X Cust. Y Sec. A Sec. D IDR Sec. C Sec. D IDR Br 1 Brokers / Custodian Banks Investors CB 2 Br 1 Cust. A Customer A Cust. B Customer B CB 2 Cust. X Customer X Cust. Y Customer Y

Benefit & Advantage of Sub Accounts – Investor Protection • Assurance of separated bookkeeping for securities owned by the investor and • • those owned by the custodian Assurance of accurate recording of investor securities ownership position Assurance of rights attached to securities such as dividend; right to attend RUPS (Shareholder General Meeting), as investor will be listed in the List of Shareholders issued by KSEI – Availability of real time investor data in KSEI, for the purpose of : • performing corporate action • Issuer’s reporting to Bapepam, Stock Exchange, Central Bank, for among • • • others: investigation. Monitoring share ownership of > 5% investigation by authorities, like: Bapepam, Court of Justice, Police. producing reports. – Corporate action proceeds distribution efficiency. – Assuring proper tax rate applied upon investor in the occurrence of Corporate Action

Investor Types • Individual Investor – Local – Foreign • Institutional Investor : – Local : • • • Limited Company Brokers Insurance Bank Government of Indonesia Pension Fund Mutual Fund Foundation Jamsostek (Labor Social Security) Cooperative Custodian Bank Taspen (Civil Servant Insurance Savings) – Foreign : • Tax Treaty (each country)

Account Details • Account Number AB 001 – XY 12 – 001 – 99 Local_Code – Client_Code – Acc_Type – Check. Digit • Correspondent Account Number : account on PB (mirroring acct) – only for Own Acct and Collat. Acct • Account Description : name of client • Status : Available/Blocked/Closed • Tax ID • Blocking Reason (if any; only for Blocked Acct. ) • ID number : KITAS / COR / COD / NPWP • Address • Nationality

Account Maintenance Open Account : – – – Supporting documents will define the investor type and tax rate of the account No documents the highest tax rate (20%) Upload facility (Internal use) Modify : – Usually to change / to adjust tax rate, address, account description. Block/Unblock : – To Pledge / unpledge, Lock-up by Stock Exchange, other reasons. Close : – – Account should be zero balance Can Not be recycled Account linkage : – – Related to Post Trade Processing module. To link an Investment Manager’s sub account to a custodian bank

Data and Supporting Documents • • • • Local Individual : Identity No and address according to Identity Card Foreign Individual : copy of ID card if residing in Indonesia or copy of Certificate of Tax Residence (COTR) legalized by tax office if otherwise. Local Institution : - Foundation, Cooperative, Insurance, Ltd. : copy of Tax Registration - Pension Fund : copy of State Minister of Finance Decree (SKMK) and Tax Reg. - Mutual Fund : copy of Effective Letter (from Bapepam) and Tax Registration - Jamsostek JHT : State Minister of Finance Decree (SKMK) - Jamsostek Non JHT : copy of Tax Registration - Taspen : copy of Tax Registration Foreign institution: copy of Certificate of Tax Residence (COTR) legalized by tax office, Foreign Institution exempted from income tax: State Minister of Finance Decree No. 574/KMK. 04/2000 dated December 26 th 2000 Armed Forces (ABRI) : Letter of Acknowledgement from Dir. Gen. of Tax Indonesia Government: RI State Regulation

Transactions in C-Best • Depository Management – Deposit – Withdrawal – Security Transfer (within one Member) • Clearing and Settlement – DFOP/RFOP – DVP/RVP • Cash Management – Book Transfer (cash transfer within one Member) – Wire Transfer (cash withdrawal) • Collateral Deposit • Lendable Deposit • Post Trade Processing – Trade Confirmation – Settlement Instruction

Instruction Creation C-Best Server Input via C-Best workstation Instruction Investor KSEI Participant • • • 6 -eyes principle (create, check, approve) 4 -eyes principle (create direct check, approve) 2 -eyes principle (create direct approve) OTC SECTRS BTS WT DCONF REC File upload Instruction Investor Participants are responsible for the data they input.

Stock Exchange Settlement Selling broker KSEI Buying broker Own Account OTC Client Account Delivery Account Receiving Account Custodian Bank Collateral Account KPEI Own Account stock KPEI Account cash alignment L&B Account Client Account Receiving Account synchronize Delivery Account Collateral Account L&B Account Stock Cash Payment Bank OTC

Over The Counter Transaction MATCHING PROCESS A Brokers / Cust. Banks X Brokers / Cust. Banks 1. DVP INSTRUCTION 3. DFOP INSTRUCTION 1. DVP : DELIVERY VERSUS PAYMENT 2. RVP : RECEIVE VERSUS PAYMENT KSEI A B X Z 2. RVP INSTRUCTION 4. RFOP INSTRUCTION B Brokers / Cust. Banks Z Brokers / Cust. Banks 3. DFOP : DELIVERY FREE OF PAYMENT 4. RFOP : RECEIVER FREE OF PAYMENT

Corporate Action • Mandatory CA • Voluntary CA – Cash dividend – IPO – Stock dividend – Exercise of Right/Warrant – Mix dividend – Securities conversion – Stock bonus – Stock split / reverse split – Merger / acquisition – Interest payment – Principal payment (Redemption) – Right / Warrant distribution – Proxy Voting

General Process of Mandatory CA Announcement Date (AD) Record Date (RD) Effective date Reminder Date (Rem Date) (1) (2) Credit Entitlement of CA (3) (4)

Member Entitlement • • • Containing the list of all accounts (including own account and clients’ sub accounts that are entitled to proceeds of Corporate Action) Generated on Record Date + 1 All KSEI members receive this report via workstation

Voluntary CA Process Announcement date Start Exercise period Instruction Deadline Effective date x days * Voluntary CA Instructions * The Rights/Warrants and cash positions will be debited automatically in the exercise request amount

Distribution of CA proceed C-Best Back-end system KDPW ISSUER Proceeds Issuer’s account Payment Bank (cash proceed) Registrar (sec proceed) member 1 Own Deps a/c Client a/c 001 Client a/c 002 Client a/c 003 Client a/c 004 member 2 Own Deps a/c Client a/c A Tax Central tax account

Security Holder List • Issuer / Registrar requirement • On request (Ad hoc report) • Containing the complete data of Security holders : – General Data : • Security Name & Code • Record Date • Total Securities Issued – Security holder list : • • • Name ID number Address Investor type Nationality Tax rate Member Name & Code (where the investor open the account with) Securities Amount Percentage of ownership Status of account

Issues on Sub Accounts Implementation • Still practices physical archiving of COD/COTR and other supporting documents • Uncertainty of investors numbers – Some brokers do not open sub accounts for some of their clients. – Investors may keep several accounts at different brokers/custodians under the same or different names or ID numbers • Rely on the data given by brokers/custodians

Conclusion KSEI implements Indirect Account (Sub Account) • Does not need to deal with thousands of investors. KSEI only deals with Participants (Brokers & Custodian) • Reduce operational activities : – No Counter Desk – Participants (Brokers & Custodians) assure the accuracy of client identity. (KYC) • Investor Protection : – Separate bookkeeping – Assurance of rights attached to any CA event. • Corporate Action process efficiency ; – CA Entitlement & Distribution : up to investors’ depository accounts.

Thank You