From Paper to Paperless

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From Paper to Paperless Update on the Electronic
Disclosure Project (EDP)
Media Workshop 8 June 2007
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Agenda

• Background of EDP
• Preparing stakeholders
• EDP operations
• Changes to HKEx websites
• Suspension arrangements under EDP
• Questions and Answers

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Background

• Electronic Disclosure proposals in summary
• Abolish mandatory requirement for paid ad in
  newspapers
• Mandate electronic submission
• Provide straight-through processing
• Require issuers to establish their own website by
  25 June 2008
• New Measures effective from 25 June 2007
• Transitional arrangements
• Until 24 December 2007 issuers to publish a
  notification in newspapers
• Until 24 June 2008 issuers without their own
  website must continue to publish announcements in
  newspapers
• Communication, education and familiarisation

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System enhancements
HKEx has enhanced related systems to cope with
EDP implementation

• ISC email/mobile alert service - enhanced to
  support more frequent dissemination and expanded
  stock coverage
• AMS/3 - enhanced to provide traders with issuer
  news alert whenever an announcement is posted on
  HKEx website
• HKEx website - enhanced to support display and
  searching of free-text title and selected
  headline categories
• Issuer Information feed System - enhanced to
  carry free-text title and headline categories and
  support more effective dissemination of issuer
  information
• ESS and EPS enhanced to support higher system
  capacity, straight-through dissemination of
  issuer documents, new headline categories,
  provision of title and tightened security control

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Preparing issuers (1)
Following issuer and agent briefing sessions in
early 2007, HKEx has made continuous efforts to
prepare listed issuers for EDP.
Familiarisation

• ESS registration - All active equity issuers
  (except those prolonged suspended) and agents
  completed registration. New issuers join in on an
  ongoing basis.
• Familiarisation Sessions - 17 sessions held in
  April and March, with total number of
  participating company exceeding 2,900
  (representing 99 of all listed issuers) and
  achieving the successful submission of nearly
  6,500 documents.
• Readiness confirmations - Almost all listed
  issuers (97) have confirmed in writing their
  readiness for EDP implementation.

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Preparing issuers (2)
Support for issuers

• FAQs - Detailed guidance on ESS usage and
  EDP-related matters are available to listed
  issuers through the publication of a
  comprehensive set of Frequently Asked Questions.
• EDP web corner - Other supporting documents
  including ESS user manuals, training materials,
  reference documents and Listing Rules changes
  have been posted on EDP web corner on HKEx
  website.
• ESS Hotline service - Issuers and agents are
  well supported by ESS hotline which received over
  2,900 calls during the familiarisation and
  hands-on sessions. Over 98 of respondents were
  satisfied with the answers given and the hotline
  service.

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Market communication
Apart from the publication of a communication
paper and the opening of public viewing room,
HKEx continues to raise public awareness of EDP.

• Promotion and advertisement - HKEx has promoted
  EDP via paid advertisements in local newspapers
  and electronic means HKEx will arrange further
  promotion in June.
• Informed Investor campaign HKEx is working
  closely with 25 organisations, including almost
  all major brokers and banks offering online
  trading services, to promote EDP and the free ISC
  news alert service. Posters and handbills are
  distributed to the general public via brokers,
  professional bodies and public libraries.
  Subscribers of the ISC news alert service rose by
  36 in seven weeks to 27,767 as at 1 June.
• Briefings for Exchange Participants (EPs) and
  Information vendors - Information on EDP and
  its implications to brokers and information
  vendors was delivered via various briefing
  sessions and EP circulars.
• Communication with professionals - Speeches and
  articles about EDP have been presented at various
  platforms.

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Market readiness

• Successful completion of familiarisation sessions
• Readiness of EDP related systems
• Confirmation by listed issuers on their EDP
  readiness
• Extensive market communication and education

The Hong Kong securities market is ready for the
new era of Electronic Disclosure to commenced on
25 June 2007
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EDP Operations (1)

• ESS operational hours
• Monday - Friday, 6am - 11pm (business days only)
• Non business day immediate preceding a business
  day, 6pm - 8pm
• Publication windows
• Different Publication windows for various types
  of issuer documents
• All Announcements and Notices cannot be
  disseminated between 900am 415pm, except for
  the following
• overseas regulatory announcements
• clarification on unusual share price/turnover
  movement or media reports
• suspension notices
• result announcements (between 1230pm 130pm
  only)
• Other documents including Circulars and Annual
  Reports can be submitted anytime during ESS
  operational hours.

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EDP Operations (2)

• Language
• Submission of English and Chinese versions must
  be simultaneous, except listing documents and
  annual reports which should be submitted one
  immediately after the other, and certain single
  language documents (e.g. overseas regulatory
  announcements)
• Title and Headline categories
• Issuers must select all headlines as appropriate
  (the list of headline categories is set out in an
  appendix to the Listing Rules. Guidance
  materials will be published)
• Issuers must input in the designated free-text
  field the same title as that in the document

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Changes to HKEx website (1)
Latest Listed Company Information
Display of issuer- selected headline categories
and document title
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Changes to HKEx website (2)
Listed Company Information Search
Content search for document title
Search by headline category
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Changes to HKEx website (3)
Board Meetings Notification is now displayed
under the Investor section
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Changes to HKEx website (4)
Dividends Other Entitlements is also under the
Investor section
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Changes to HKEx website (5)
Trading Arrangement Table is now under the
Trading Information section
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Changes to HKEx website (6)
Basket Warrants Exotic Warrants Information is
now spilt into two tables under the Derivative
Warrant Resources Centre
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Suspension Arrangements under EDP

• Any changes under EDP?
• ? Suspension principles
• ? Primary publication channel for GEM issuers
• ? Primary publication channel for Main Board
  issuers
• ? Publication window
• ? Assessment criteria
• ? Duration of suspension

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Suspension Arrangements under EDP

• Suspension Principles
• Issuers have a continuing obligation under
  Listing Rules to provide timely disclosure of all
  price sensitive information and ensure the even
  dissemination of that information.
• Trading suspension is the tool to address
  potential and actual market disorder. For
  instance, there is uneven dissemination of price
  sensitive information and the issuer is unable to
  publish an announcement in a timely manner.
• Trading suspension will only be lifted after
  issuer has published the announcement, and
  investors have been given sufficient time to
  consider the price sensitive information.
• Duration of suspension should be for the shortest
  possible period.

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Suspension Arrangements under EDP

• Price Sensitive Information (PSI)
• Information relating to the issuer that is
  necessary to enable investors to appraise its
  position, or information which might materially
  affect trading of the issuers securities (e.g.
  favorable or adverse changes in financial
  performance group reorganisation, material
  transactions)
• Certain material transactions are deemed price
  sensitive under the Listing Rules (e.g. major
  transaction, very substantial acquisition, very
  substantial disposal, issuance of securities.)

Assessment of what is price sensitive information
is made by the issuer, having regard to the
specific circumstances and its own position.
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Suspension Arrangements under EDP

• Primary channel for publication of announcements
• Current regime newspapers for Main Board
  issuers and GEM website for GEM issuers
• EDP regime HKEx website for Main Board issuers
  and GEM website for GEM issuers

Failure to publish the announcement on the
primary channel in a timely manner may result in
suspension of trading.
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Suspension Arrangements under EDP

• Publication window (EDP)
• With a few exceptions (e.g. certain non-PSI
  announcements), publication of announcements will
  be outside trading hours (i.e. between 415 pm to
  11 pm or between 600 am to 900 am)
• Results announcements can be published during the
  lunchtime publication window (i.e. 1230 pm to
  130 pm).

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Suspension Arrangements under EDP
Assessment Criteria

• Criteria 1 Is the subject matter of the
  announcement price sensitive information?
• EDP brings no change.
• Criteria 2 Is publication of the announcement
  timely?
• EDP changes the primary publication
  channel for Main Board issuers to the HKEx
  website

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Suspension Arrangements under EDP
Duration of suspension

• Current regime suspension of Main Board issuer
  is lifted after the publication of the issuers
  announcement in newspapers on the next day.
• EDP regime suspension of Main Board issuer will
  be lifted after the publication of the issuers
  announcement on HKEx website and sufficient time
  has been allowed for investors to consider the
  information.

Duration of suspension may be shortened due to
the change of primary channel from daily
newspapers to Internet.
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Suspension Arrangements under EDP

• Need for suspension?
• Main Board issuers (other than results
  announcements)
• Non-PSI Regardless of the time of publication ?
  no suspension
• PSI Depending on the publication time ?
• No suspension if the announcement is published on
  the HKEx website by 1100 p.m. (or the 2-hour
  submission window on a non-business day before a
  business day)
• Suspension for half day if the announcement is
  published by 900 am of the next business day

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Suspension Arrangements under EDP
Main Board issuers (other than results
announcements)

• Example 1 Issuer announces a major transaction
• No suspension if the announcement is published on
  a timely basis
• Current regime submission to newspapers on that
  evening (Day 1) for publication on the next
  business day (Day 2)
• EDP regime announcement submitted and published
  on HKEx website by 1100 p.m. on that evening
  (Day 1)
• Issuer missed the cut-off deadline that evening
  (Day 1).
• Current regime announcement is not published in
  newspapers on the next day (Day 2), suspend for a
  day (Day 2) pending publication in newspapers on
  the following morning (Day 3). Resume trading in
  the morning of Day 3.
• EDP regime issuers may submit and publish on
  HKEx website before 900am the next morning (Day
  2) and resume trading in the afternoon (Day 2).

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Suspension Arrangements under EDP
Main Board issuers (other than results
announcements)

• Example 2 Issuer announces a continuing
  connected transaction which it determines not to
  be price sensitive
• Issuer should publish the announcement as soon as
  possible.
• No suspension for late publication as subject
  matter is not PSI
• Suspension practices under current and EDP
  regimes are the same.

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Suspension Arrangements under EDP

• Need for suspension?
• GEM issuers (other than result announcements)
• Same as non-results announcements for Main Board
  issuers, except
• Publication deadline extended from 1100pm in the
  evening to 900am of the next business day.
  Suspension is not required if the announcement is
  published during the morning window.
• Contrary to the Main Board, there is no newspaper
  notification requirement.
• In practice, the new deadline is similar to the
  current regime.

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Suspension Arrangements under EDP

• Need for suspension?
• Result announcement (for Main Board and GEM
  issuers)
• Same as non-results announcements for Main Board
  issuers, except
• Publication deadline is extended from 1100pm of
  the day of board meeting to 900am on the next
  business day for issuers. Suspension is not
  required if the announcement is published during
  the morning window.
• If the 900am deadline is not met, publication
  can be made during the lunchtime publication
  window on the same day. Suspension for half day.

New suspension practice is consistent with the
current suspension policy which allows results
announcements to be published during the
lunchtime publication window. The new practice
should reduce the need for suspension as issuers
have more opportunities to publish the
announcement.
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Suspension Arrangements under EDP
Results announcements (Main Board and GEM issuers)

• Example 3 issuer conducts board meeting in the
  afternoon on Day 1 to approve preliminary final
  results
• No suspension if the announcement is published on
  a timely basis
• Current regime announcement is i) published on
  HKEx website that evening or next morning before
  trading (Day 2) and 2) submitted to newspapers
  on that evening (Day 1) for publication on next
  business day (Day 2)
• EDP regime announcement is published on HKEx
  website by 1100pm of that evening (Day 1), or
  900am of the next business (Day 2)
• Issuer missed the newspaper cut-off publication
  deadline that evening
• Current regime results are not properly
  disseminated. Suspend for a day (Day 2) pending
  publication in the newspapers on the following
  morning (Day 3)
• EDP regime
• No suspension if issuer publishes the
  announcement on HKEx website before 900am the
  next morning (Day 2),
• Suspend for half day if announcement is published
  during the lunchtime publication window of the
  next business day (Day 2).

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Suspension Arrangements under EDP
Results announcements (Main Board and GEM issuers)

• Example 4a issuer conducts board meeting in the
  morning of Day 1 to approve preliminary final
  results
• Announcement published on the HKEx website during
  the lunchtime publication window on that day (Day
  1).
• Current regime submission to newspapers on that
  evening (Day 1) for publication on next business
  day (Day 2). If the results announcement is not
  published in the newspapers, suspend for a day
  (on Day 2).
• EDP regime announcement is already published on
  the HKEx website.
• Example 4b issuer conducts board meeting in the
  morning of Day 1 to approve preliminary final
  results
• Announcement not published during the lunchtime
  publication window that day.
• Under both current and EDP regimes, no suspension
  if confidentiality can be maintained and
  announcement can be published by 900 am the next
  morning

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Publication in the newspapers (Main Board issuer
only)
Suspension Arrangements under EDP

• As transitional arrangement, notification must be
  published in the newspapers until 25 December
  2007
• If the issuer has made no effort to publish the
  newspapers notification and the subject matter of
  the announcement is price sensitive, suspension
  for a full day may be required
• Suspension will be evaluated on a case by case
  basis. The Exchange will make enquiries with the
  issuer on circumstances leading to the failure,
  balancing the requirement to notify investors
  against the interest of the investing public to
  trade in the securities.

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Suspension Arrangements under EDP
Conclusion

• In sum, there will be more flexible publication
  windows for issuers because
• Where price sensitive announcements are posted by
  900am on the next day, trading can resume in the
  afternoon session.
• Results announcements can be published by 900am
  and no suspension is required. Where the morning
  deadline is missed, the announcement can be
  published during the lunchtime publication window
  (between 1230pm to 130pm), trading can resume
  in the afternoon session.
• The new regime is expected to reduce suspensions,
  increase market availability and facilitate
  trading of securities on a fully informed basis.
  
• The ESS submission process is streamlined (e.g.
  text file for ASM/3 will no longer be required)
  and will accelerate the publication process.

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• Questions Answers