Recommendation 1 Recommendation 2 Recommendation 3 Recommendation 4

Recommendation 5 Recommendation 6 Recommendation 7 Recommendation 8

Market selection

Recommendation 1

Securities Systems* have a primary responsibility to their users** and other stakeholders. They must provide effective low cost processing. Services should be priced equitably.

* Securities Systems = depositories, settlement and clearing systems
** Users = customers of the securities system, and all other parties to whom the securities system owes a duty of care

1.	Is the board that governs the depository answerable to its users?	Yes, KDD has a seven-member Board of Directors: five representatives of KDD shareholders, one representative of KDD employees, one representative of the Bank of Slovenia, As KDD is owned by its users (e.g. banks, management companies, brokerage firms), the Board of Directors is largely occupied by their representatives. Responsibilities of the Board of Directors include: The Board of Directors supervises the conduct of business of the KDD and may inspect reports, accounts, and any other documents of KDD. The Board of Directors may demand a verbal or written report of KDD's CEO on company business any time. Furthermore the Board of Directors' approval is needed for all rules and procedures to come into force. The Board of Directors is also responsible for relationships between KDD and its members. Finally, the Board of Directors may name committees and other expert bodies for certain matters or fields.
2.	Does any single organisation, or sector (e.g. brokers, custodians, Stock Exchange) have a large voting position at the board of the depository?	KDD was constituted by 49 shareholders under four owner groups: banks (27%), brokerage firms (26%), government funds (24%) and management companies (23%). The current ownership structure is as follows: banks 33% brokerage houses 6% government funds 24 % fund management companies 30% securities` issuers 7%
3.	Is there cross subsidisation of products (e.g. international services subsidised by local ones or transaction costs subsidised by asset servicing charges)?	There are some cross subsidies as KDD must offer certain services free of charge (e.g. services relating to various court decrees, tax authorities decrees, various reporting duties to the Courts, Tax Authorities, Office of money laundering prevention, the Police, State Prosecutor's Office and other regulatory bodies - such as Bank of Slovenia, Securities Market Agency etc.).
4.	What process is in place at the depository to ensure that it meets the needs of all its stakeholders (e.g. institutions, broker dealers, retail investors, issuers)?	There are three participants` associations in Slovenia: The Association of Investment Management Companies Broker-dealer Association The Association of Banks KDD communicates with the appropriate Association as well as the Securities Market Agency and/or the Bank of Slovenia on a continuous basis. Procedures for communicating and implementing major changes in the infrastructure and/or legal environment is also in place; we briefly present it below: Every member obtains a full set of rules and procedures as they are a component part of the membership agreements. All participants are provided with copies of rules and procedures. Updates are mailed out prior to amendments or changes take effect. Additional copies are available on request. All changes and future developments are communicated to KDD's members through their representative associations. Participants are provided with user guides and manuals. These, however, do not have the same status as the rules and procedures. User guides and manuals contain technical details on system procedures only. Rules and procedures may be changed or amended if required either by changes in the market environment and legislation, or as a consequence of the development of KDD's own system. Changes are drafted by KDD. Each participant has the right to comment on proposed rules. Participants usually exercise their right through their Participants Association, which comments or proposes different amendments to the rules and procedures before the drafted amendments are approved by the Board of Directors. They also hold a majority of votes in the KDD's Board of Directors. After the adoption by the KDD's Board of Directors, the final acceptance for all changes of rules and procedures as well as changes of parts of the KDD's fee schedule is required by the Securities Market Agency and the Government of the Republic of Slovenia. Copies of rules and procedures and technical updates are delivered to the members before they enter into force. Participants are informed of changes by letter with revised copy of documentation enclosed. The notifications usually occur at least 15 days before changes come into effect. The rules and procedures are binding on both KDD and the participants. They can not be waived or overridden, except by the normal procedure of changing or amending the rules as described above. The rules and procedures are set out in KDD's Business Rules, Articles of Association, as well as in several procedures governing separate fields of operation. KDD's rules and procedures are presently organised as follows: General Business Rules Central Registry Rules Clearing Rules Guarantee Fund Rules Buy-in / Sell-out Rules Depository Rules Take-overs Rules
5.	What is the communications strategy of the depository to its stakeholders and how is this run?	Besides the above-mentioned communication methods KDD, as an incorporated entity, formally communicates with its shareholders by means of the annual general meeting. The AGM adopts the company's annual report and profit allocation, and takes on changes and amendments of the Act of Incorporation, auditor's nomination, members of the Board of Directors, change of share capital and other issues according to the Slovenian legislation.