INVESTOR ACCOUNT SERVICE IN CCASS

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INVESTOR ACCOUNT SERVICE IN CCASS
The 8th ACG Cross Training Seminar Hong Kong
Securities Clearing Company Limited 27 28 June
2006
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Agenda

• 1. Background
• 2. Admission Requirements
• Scope of Services
• CCASS Service Fees
• Benefits
• Stock Segregated Account with Statement Service

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BackgroundProfile of HKSCC

• 1989 - incorporation of HKSCC
• Hong Kong Securities Clearing Company Ltd
• 1992 - recognised as clearing house and became
  operator of CCASS
• Central Clearing And Settlement System
• A computerised book-entry clearing and
  settlement system for transactions in
  securities listed on the Stock Exchange of HK
• May 1998 - introduced Investor Account Service
• Mar 2000 - became a wholly owned subsidiary of
  HKEx

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BackgroundHKSCC Participantship

• Brokers (433)
• Clearing Agency (1)
• Custodians (37)
• Stock Lender (0)
• Stock Pledgee (6)
• Investor Participants ( 14,700)
• Figures as of 31 May 2006

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BackgroundInvestor Account Service

• May 1998
• - introduce for individual and corporate
  investors in HK
• Dec 1999
• - accept BVI incorporated companies
• Jun 2006
• - open for Macau residents and corporations

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BackgroundInvestor Account Service
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BackgroundInvestor Account Service

A Safe alternative..
.. Legal protection for shares deposited with
HKSCC .. No need to worry about loss of
physical certificates
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Admission Requirements

• Individual Investor Accounts
• HKID / Macau Resident ID Card Holder aged 18 or
  above
• Joint Individual Investor Accounts
• HKID Card Holders aged 18 or above
• Up to a maximum of 4 Investors per account

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Admission Requirements

• Corporate Investor Accounts
• Corporations incorporated in HK under the HK
  Companies Ordinance, or by any legal entity
  incorporated in HK under HK Law
• Overseas Corporations incorporated in the British
  Virgin Islands (BVI) under the International
  Business Companies Act (IBC Act)
• Corporations incorporated in Macau under the
  Commercial Code of Macau

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Admission Requirements

• Maintain a correspondence address in Hong Kong /
  Macau
• Maintain a HKD Designated Bank Account for CCASS
  money settlement purpose

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Scope of ServicesNature of Investor Account

• NOT mandatory
• A depository account for share custody
• Purchases and sales of stocks made by Investor
  Participants (IP) and the resulting settlements
  will continue to be handled by CCASS Broker or
  Custodian Participants

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Scope of ServicesTransaction Flow
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CCASS
Transactions transmit to CCASS
Designated Bank
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Money Settlement
Broker
IP A/C
IPs Designated Bank
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7
Order Matching Result
Affirm ISI
Brokers Designated Bank
1
Place Order
Broker
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Scope of Services

• Stock transfer and settlement
• Custodial services
• Nominee services

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Scope of ServicesStock Transfer

• What is ISI ?
• Investor Settlement Instructions (ISI) are used
  to initiate stock transfer and money settlement
  electronically through CCASS between IP and
  Broker, Custodian or Stock Pledgee Participants

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Scope of ServicesMoney Settlement

• Electronic money settlement between CCASS and
  Participants

CCASS generates the following instructions for
money settlement
Electronic Payment Instruction (EPI)
Direct Debit Instruction (DDI) / Direct Credit
Instruction (DCI)
To process the money settlement of an ISI
between an IP and a Broker/ Custodian Participant
To process the money settlement between an IP
and CCASS e.g. dividend payment / fees
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Scope of ServicesMoney Settlement for ISI

• Three payment options are available for ISI
  transactions
• Free of Payment (FOP)
• Delivery versus Payment (DVP)
• Realtime Delivery versus Payment (RDP)

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Scope of ServicesMoney Settlement

• Free of Payment (FOP)
• Money settlement is to take place outside CCASS
  and HKSCC is not involved
• IP should arrange with their counterparties if
• money settlement is required outside CCASS

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Scope of ServicesMoney Settlement (DVP)

• Delivery versus Payment (DVP)
• Shares settled in advance to money settlement
• An EPI will be generated and funds settled
  through the overnight interbank clearing
• Receipt of payment must be monitored by both
  delivering and receiving parties

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Scope of ServicesMoney Settlement (RDP)

• Realtime Delivery versus Payment (RDP)
• Shares will be put on-hold in the delivering
• Participants stock account
• CHATS payment instruction will be generated
• If payment is confirmed, the shares will be
  delivered to the receiving party immediately
  Otherwise, the shares will be released back to
  the delivering party

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Scope of ServicesCustodial Services

• IP can deposit or withdraw physical share
  certificates into or from CCASS
• Shares deposited in CCASS are re-registered under
  the name of HKSCC Nominees Limited
• Shares withdrawn from CCASS are required to be
  re-registered to the name of IP

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Scope of ServicesNominee Services
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Scope of ServicesNominee Services

• Receive corporate information directly from
  listed issuers, e.g. annual reports and notices
• HKSCC will collect benefit entitlements for IPs
  and distribute to their stock / designated bank
  accounts electronically

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Scope of ServicesNominee Services

• HKSCC will credit the entitlement in relation to
  corporate actions (such as rights subscription,
  open offer / takeover, etc) directly to stock /
  designated bank accounts of IPs
• Choose to attend corporate meetings in person,
  appoint representatives to attend meetings or
  appoint HKSCC to vote for them

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Scope of ServicesOthers

• HKSCC will send statements and provide enquiry
  function to IP about the corporate actions and
  deadlines, such as subscription, voting
  dividend election requiring their action
• Apply for initial public offering (IPO) and
  tender electronically via CCASS and have HKSCC
  credited allotted shares into their stock
  accounts and refunds to their designated bank
  accounts directly

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Scope of Services - optionalShort Message
Services (SMS)

• Short Message Services (SMS) include
• Investor Settlement Instructions (ISIs)
• Announcement summary and deadline for dividend
  election and voting instructions
• EIPO and tender announcements
• Rejected transactions such as Direct Debit
  Instruction

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Scope of Services Communicating with CCASS
CCASS
CCASS Internet System
IP a/c - 1
IP a/c - 3
Stock a,b,c.
Stock a,b,c.
IP a/c - 2
Stock a,b,c.
Counter Service
CCASS Phone System
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CCASS Service Fees
HKSCC charges IP the same fees as it charges
other CCASS Participants (subject to adjustments
in minimum and maximum fees, where appropriate)

• Stock Custody Fee
• 0.012 per board lot or odd lot
• minimum fee of 20 and maximum fee of 3,000
• per month

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CCASS Service Fees

• Dividend/Interest Collection Fee
• 0.12 of the cash amount of dividend/interest
• minimum fee of 10 and maximum fee of 500
• per stock/debt in one currency on the same day
• ISI Stock Settlement Fee
• 0.002 of the gross value for each ISI
  transaction
• minimum fee of 2 and a maximum fee of 100
• each transaction

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Benefits
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Benefits

• Control over the movement of shares deposited in
  CCASS
• Receive records of shareholdings in CCASS
• Enjoy better legal protection of shareholdings in
  CCASS
• Enjoy a variety of communication channels

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Stock Segregated Account with Statement Service
(SSA)

• Investors has to open SSA via brokers /
  custodians
• SSA is owned by brokers / custodians
• No legal relationship between HKSCC and SSA
  holders
• Stock in custody of and movement is controlled by
  brokers / custodians

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Stock Segregated Account with Statement Service
(SSA)

• A service enabling investors to reconcile their
  stockholdings and trading records kept by their
  brokers or custodians with statements issued by
  HKSCC
• Receive corporate communications direct from
  share registrars

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• Thank You