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

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

3. Background Profile of HKSCC
incorporation of HKSCC
Hong Kong Securities Clearing Company Ltd
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 introduced Investor Account Service
Mar became a wholly owned subsidiary of HKEx

4. Background HKSCC Participantship
Brokers (433)
Clearing Agency (1)
Custodians (37)
Stock Lender (0)
Stock Pledgee (6)
Investor Participants ( ~14,700)
Figures as of 31 May 2006

5. Background Investor 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

6. Background Investor Account Service
Three common options for shares custody in HK:
There is another option:
Entrust with HKSCC
Keep physical certificates
Entrust with a Broker
Entrust with a Custodian Bank

7. Background Investor Account Service
A Safe alternative…..
….. Legal protection for shares deposited with HKSCC
….. No need to worry about loss of physical certificates

8. 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

9. 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

10. Admission Requirements
Maintain a correspondence address in Hong Kong / Macau
Maintain a HKD Designated Bank Account for CCASS money settlement purpose

11. Scope of Services Nature 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

12. Scope of Services Transaction Flow3
Order Matching 5
CCASS
Transactions transmit to CCASS
AMS/3 9
Designated Bank
Money Settlement
Broker
IP A/C 8
ISI settlement
IP’s Designated Bank 2
Input Trade Order 6
Input ISI 4 7
Order Matching Result
Affirm ISI
Money Settlement 10 IP
Broker’s Designated Bank 1
Place Order
Broker

13. Scope of Services Stock transfer and settlement Custodial services
Nominee services

14. Scope of Services Stock 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

15. Scope of Services Money 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

16. Scope of Services Money Settlement for ISI
Three payment options are available for ISI transactions:
Free of Payment (FOP)
Delivery versus Payment (DVP)
Realtime Delivery versus Payment (RDP)

17. Scope of Services Money 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

18. Scope of Services Money 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

19. Scope of Services Money Settlement (RDP)
Realtime Delivery versus Payment (RDP)
Shares will be put on-hold in the delivering
Participant’s 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

20. Scope of Services Custodial 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

21. Scope of Services Nominee Services
Receive
Corporate Documents
Voting
Subscription
Entitlement Distribution
& Election

22. Scope of Services Nominee 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

23. Scope of Services Nominee 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

24. Scope of Services Others
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

25. Scope of Services - optional Short 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

26. Scope of Services Communicating with 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

27. 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

28. 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

29. Benefits Stock Custody Nominee Services Other Services
Stock Deposit
Stock Withdrawal
Electronic Share Transfer
Electronic Money Settlement
Receive Corporate Documents
Entitlement Distribution & Election
Subscription
Voting
eIPO
SMS Alert Message
Stock Custody
Nominee Services
Other Services
Stock Deposit
Stock Withdrawal
Electronic Share Transfer
Electronic Money Settlement
Receive Corporate Documents
Entitlement Distribution & Election
Subscription
Voting
eIPO
SMS Alert Message

30. 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

31. 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

32. 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

33. Thank You