Bursa Malaysia Depository Sdn Bhd ACG CROSS TRAINING

Bursa Malaysia Depository Sdn Bhd ACG CROSS TRAINING Merits and Demerits of Direct and Indirect Account Method 27 th & 28 th June 2006 Bursa Malaysia and its Group of Companies (“Bursa Malaysia”) reserve all proprietary rights to the contents of this Presentation. No part of this Presentation may be used or reproduced in any form without the Bursa Malaysia’s prior written permission. This Presentation is provided for information purposes only. Neither the Bursa Malaysia nor the Presenter make any warranty, express or implied, nor assume any legal liability or responsibility for the accuracy, completeness or currency of the contents of this Presentation. It is your responsibility to verify any information before using or relying on it.

AGENDA • Introduction - Bursa Malaysia Depository Sdn Bhd - CDS Users - Benefits of CDS - Depository’s Services - Account Structure - Account Status - Statistic • • • Differences Between Direct & Indirect Account Merits of Direct & Indirect Account Demerits of Direct & Indirect Account

INTRODUCTION BURSA MALAYSIA DEPOSITORY SDN BHD In November 1992 Bursa Malaysia Depository Sdn Bhd (formerly known as Malaysian Central Depository Sdn Bhd) began providing the Central Depository System (CDS) to the investing public through the opening of CDS accounts. It was a system designed to revolutionise the securities industry in Malaysia.

CDS USERS Provides depository services to the following users through the Central Depository System (CDS): Authorised Depository Agent (ADA) Authorised Direct Member (ADM) Issuer Issuing house Share registrar Account holder / depositor Clearing House

BENEFITS OF CDS m Increased efficiency – Via a computerised book-entry system, it has improved the efficiency of securities transactions e. g. on-line transfer of securities m Increases the capacity of clearing and settlement of securities m Reduces settlement risk - eliminate lost, fraud or misplaced certificate m Automatic registration - save time and costs

DEPOSITORY’S SERVICES Core services provided are as follows: Account openings Deposit of securities Transfer of securities Withdrawal of securities Book-entry settlement Initial Public Offerings (IPOs) Corporate exercises Provision of information

ACCOUNT STRUCTURE Direct Account : m held directly in the name of individual, corporate body, institutional investors and etc. Indirect Account : m held in the name of nominees where the beneficial owner details are captured m one nominee account one beneficial owner m nominees account can only be opened by Authorised Nominees i. e. bank/ broker/trust companies m Certain relaxation was introduced whereby nominee company can operate omnibus account effective 21 October 2005.

ACCOUNT STATUS Active Account : m Accounts having transaction or balance for the last 3 years. Inactive Account : m Accounts with balance but without any transaction for the last 3 years. Dormant Account : m Account without balance and transaction for the past 3 years.

STATISTIC AS AT 31 MAY 2006 m No. of Participants Authorised Depository Agent (ADA) Authorised Direct Member (ADM) - 37 - 27 m No. of Participants Branches Authorised Depository Agent (ADA) Authorised Direct Member (ADM) - 127 - 1 m No. of CDS Accounts - 3. 54 million m No. of Indirect CDS account No. of Direct CDS account - 0. 56 million - 2. 98 million

DIFFERENCES BETWEEN DIRECT & INDIRECT ACCOUNT Direct Account Indirect Account holder open the account with the Brokers i. e. ADA under his name directly i. e. John Smith Depositor open the account with Custodians Bank or Brokers under the name of a nominee company with the depositors as the beneficial owner i. e. ABC Nominees (Tempatan) Sdn Bhd For John Smith In direct account, the account holder is the owner of the securities in the CDS account. The depositor will be registered as the shareholder In indirect account, the nominee company is the owner of the securities in the CDS account. The name of the nominee company will be registered as the shareholder.

DIFFERENCES BETWEEN DIRECT & INDIRECT ACCOUNT Direct Account Indirect Account Dividend entitlement will be directly mailed to the depositor, while entitlement in shares will be credited directly to the appropriate account Dividend entitlement will be received by the nominee company that in turn will redirect these entitlement to the beneficial owner. Account opened for its own investment and deal with securities using this direct account Account opened for the following purpose : 1. custodian 2. margin or loan facilities purpose Requires supporting documents for opening of direct CDS account and subsequent operating process Does not require extensive supporting document The depositor is the operator of the account The nominee company is the operator of the account

MERITS OF DIRECT & INDIRECT ACCOUNT Direct Account • Depositors are in a principal relationship with Bursa Depository • Confidentiality of depositor shareholdings is protected whereby depositor’s share holding is not known to third party • The ownership of CDS account is transparent • The asset of depositor and stockbroker i. e. ADA is clearly segregated • Depositor received his/her annual reports or dividends payout directly from the registrar/issuer Indirect Account • Lesser documentation to operated such account • Do not require to be present in person to perform depository transactions • Cost savings to Bursa Depository arising from the following : - storage cost due to less documentation to stored - postage and other related stationeries on mailing of statements/notices as these notifications are send electronically to nominee company

MERITS OF DIRECT & INDIRECT ACCOUNT Direct Account • The depositors shareholdings is unaffected in the event the brokers is declared bankrupt • Depositors received notification directly from Bursa Depository in the event of any changes to its account particulars or movement of securities • CDS statement of account are issued directly to the depositor Indirect Account

DEMERITS OF DIRECT & INDIRECT ACCOUNT Direct Account Indirect Account • More documentation to operate such account • To be physically present in person to perform depository related transactions • Higher operational and maintenance cost for Bursa Depository : - storage cost for storing documents - postage and stationeries cost for sending out statements and notices to depositors • The nominee company is in a principal relationship with Bursa Depository and the beneficial owner details are merely for information • Depositor shareholding is known to third party • Depositor do not receive any notification or CDS statement of account directly from Bursa Depository • Delay in receiving dividend entitlement • Does not receive notification or annual report directly from the Issuer

DEMERITS OF DIRECT & INDIRECT ACCOUNT Direct Account Indirect Account • Incurred additional cost for services provided by the nominee company • Implication to depositor shareholdings if the nominee company is declared bankrupt • Ownership of account is not very clear.