Improving Issuer Information Dissemination Regime Paul Chow Chief Executive, HKEx Presentation at the luncheon hosted by The Chamber of Hong Kong Listed Companies 16 May 2006

2 Key messages Reliable and efficient issuer information dissemination regime helps establish a fair and sound securities market. HKEx is committed to revamp and improve the issuer information dissemination regime. Major directions: Automation, Paperless, Reduce pre-vetting and Support Listing Regulatory Function. The revamp will benefit issuers, investors and the whole market.

3 Types of issuer information Regular disclosures (e.g. annual reports, financial results, AGM notices) Ad hoc disclosures (e.g. price-sensitive information, unusual price or turnover movements, suspension notices, corporate changes) Issuer profile (e.g. listing date, place of incorporation, business classification, director list, address of principal office) Price and trade data, dividend history Regulatory records (e.g. notices of delay in issuing result announcements, high concentration of shareholdings) Listed issuer information Provided by issuers Provided by HKEx Coverage of issuer information dissemination regime

4 Importance of issuer information Fundamentals of price discovery mechanism in the stock market Disclosure of information to support investment decisions The basis for shareholders to supervise the work of corporate management and corporate governance practices The tools for academics and general public to grasp economic and industrial trends The source for media to monitor corporations’ business practices and social responsibilities

5 Development of issuer information dissemination regime 1999Issuer documents displayed at HKEx websites 2001Launch of e-Submission System 2003Launch of Disclosure of Interests Filing System 2003Introduction of Issuer Information Feed Services (IIS) Further Revamp in 2006/2007! 2006 Provision of hyperlinks to Documents of Display under Takeover Code on SFC website

6 Rapid growth of issuer information Increasing number of issuers and tightened disclosure regulation led to continuous growth of issuer information for dissemination

7 Existing issuer information dissemination regime eSubmission System (ESS) ePublication System (EPS)  Screened by ISD  Listing Division    No Issuers  CD-Rom /diskette  Fax HKEx websites Issuer Information Feed (IIS) WORD/PDF format (covers all announcements ASCII-Text format (only covers pre-vetted announcements and preliminary results announcements) AMS/3   Investors  Information vendors  Market Data Feed (MDF)  Trading terminals Vetting?   ESS Clearance    or Yes Input and uploaded by ISD or   Issuer documents, press releases and paid advertisements (Main Board Issuers and certain documents only) 

8 How issuer provides issuer documents? To HKEx: E-Submission System (ESS) CD-Rom or computer diskette delivered to HKEx’s designated collection box By fax (only limited types of documents) To other parties: Press release sent to media Published on one Chinese and one English local newspaper in the form of paid advertisements (Main Board issuers only) Mailed to shareholders (only shareholder corporate communications)

9 How to obtain issuer documents? HKEx: HKEx’s official website ( GEM website ( AMS/3 trading terminals Information vendors’ terminals Others: Paid advertisements on local newspapers News reported by printed and broadcasted media Shareholder circulars (for existing shareholders only)

10 Paid advertisement on newspaper very costly Reliance on paid ad mechanism results in more frequent suspensions Consumption of resources (i.e. papers, manpower,CD-Roms, computer diskettes) Manual uploading slows down the pace of dissemination Absence of any categorisation makes searching of issuer documents difficult Low usage of eSubmission System for publication of documents AMS/3 is not designed for display of lengthy issuer documents Pre-vetting of issuer announcements before dissemination slows down the pace of dissemination Areas for improvement and directions Paperless Automation Reduce pre- vetting Support listing regulatory function Areas for improvement

11 Revamp - Paperless Short-term goals ： Abolition by phases of the requirement for publication of issuer documents in the form of paid advertisements on newspapers Continuous promotion of electronic version of all shareholder documents (e.g. annual reports) Central depository of issuer information Long-term goals ： Electronic members list to facilitate share registration and exercise of shareholder right’s Electronic submission of proxy form and electronic voting On-line submission of IPO white form (subscription form)

12 Revamp - Automation Short-term goals ： Mandatory use of eSubmission System for publication of documents Straight-through publication of issuer documents by listed issuers with minimal human intervention Long-term goals ： e-Forms (e.g. capital change monthly returns) On-line listed issuer profiles Study on the application of XBRL

13 Revamp – Reduce pre-vetting Short-term goal ： Reduce the types of issuer announcements which need to be pre-vetted by Listing Division before dissemination Long-term goals ： Majority of issuer announcements can be disseminated without pre-vetting Dissemination to the market at any time during a day (including trading hours) so as to reduce the need for suspension

14 Revamp - Support listing regulatory function Short-term goal ： Headline categories chosen by listed issuer in uploading a document for dissemination will be used to facilitate searching Long-term goals ： Integration of issuer information dissemination system and issuer regulatory system Support Management Information System within Listing Division (e.g. Precedent cases database)

15 Proposed issuer information dissemination regime eSubmission System (ESS) ePublication System (EPS)  Listing Division  No Issuers HKEx website Issuer Information Feed (IIS) PDF format News alerts AMS/3  Investors  Information vendors  Market Data Feed (MDF)  Trading terminals Vetting?   ESS Clearance    Yes  Shareholder circulars and press releases 

16 Impacts on market - Issuers No longer required to publish announcement in the form of paid advertisements on newspapers, reducing continuous listing costs Automation of issuer information dissemination process, facilitating timely dissemination of issuer information Mandatory use of ESS for submission of documents for dissemination on HKEx websites. Issuers must become registered users of ESS and ascertain that their staff are fully equipped on the uploading of documents via the system Issuers must display the document on their own websites or a third-party website, otherwise they must publish paid advertisements on local newspapers for an interim period. Ultimately issuers must have their own websites. Issuers must upon request provide copies of the documents to shareholders and the general public at a reasonable cost

17 Impact on the market - Investors All investors will enjoy faster release of issuer information Investors familiar with newspapers’ paid advertisement as a major source to access issuer announcements will need to adjust their behavior if they wish to obtain authentic regulatory news and use alternate sources: –HKEx websites –Listed issuers’ own websites or a third-party website –News reporting of mass media –Services provided by information vendors Investors can make use of the Issuer News Alerts Services provided by Investor Services Centre on HKEx website

18 Impact on the market - Stockbrokers AMS/3 will no longer provides full text of issuer announcements. Brokers have to rely on HKEx website or information vendors’ services for access to issuer announcements HKEx will introduce a News Alerts Service so that AMS/3 traders will be alerted whenever a listed issuer announcement or document is published Floor traders at the Trading Hall have to bring their own portable PC for access to Internet, or use the online facilities available at back-up trading booths

19 Impact on the market – Information Vendors Information vendors now receiving issuer documents in ASCII- text format (prepared for dissemination on AMS/3 terminals) will no longer have such information for distribution to their customers They can shift to subscribe IIS which covers more comprehensive issuer announcements/documents A few information vendors with low-tech facilities will have to upgrade their systems in order to distribute IIS information

20 Other ideas Consolidation of current online SEHK Regulatory Records Exploring the business opportunities of valued added listed issuer information products and services Online corporate action event calendar and corporate action database Issuer information provided by HKEx

21 Conclusion Issuer information dissemination must catch up with the development of the society and the market The forthcoming revamp of issuer information dissemination regime will reduce continuing listing costs, support faster dispatch of issuer news, improve market efficiency and help retain the competitiveness of the Hong Kong securities market HKEx will seek the support and cooperation of listed issuers and other market participants to improve issuer information dissemination regime continuously