China Securities DepositoryClearing Co Ltd SDC Introduction to

中国证券登记结算有限责任公司 China Securities Depository&Clearing Co. , Ltd （SD&C） Introduction to SD&C —CSD Linkage May 2008

Contents 1、SD&C’s Roles and Main Business 2、Organization Structure of SD&C 3、SD&C’s technical systems 4、SD&C’s linkage with others 5、CSD linkage status quo 6、Future Landscapes China Securities Depository and Clearing Co. , Ltd

1、SD&C’s Roles and Main Business ●SD&C and its roles SD&C (China Securities Depository and Clearing Co. , Ltd) is the sole provider of registration, depositing , clearing and settlement services for the mainland securities markets of China. It plays multiple functions of a CSD, CCP and registrar while providing a broad range of services for market participants. China Securities Depository and Clearing Co. , Ltd

1、SD&C’s Roles and Main Business (Continued) ●SD&C’s Main Business Managing securities accounts about 76 ? ? million Issuing registered securities about 1400 ? ? Issuers Registering and Depositing securities Market value: RMB 5. 5 ? ? trillion Clearing and Settlement Participants : about 300? ? Daily Transactions : 4. 24? ? million Total settlement value 1 st quarter of 2008: RMB 13. 7 trillion? ? Net settlement value 1 st quarter of 2008: RMB 1. 24 trillion? ? Service for Issuers and Participants Dividend Distribution, providing shareholders’ list, network query, etc. China Securities Depository and Clearing Co. , Ltd

2. Orgnization Structure of SD&C(Continued) ● Orgnization Structure of SD&C The Board The Management Group SD&C Headquarter(Beijing) SD&C Shanghai Branch SD&C Shenzhen Branch China Securities Depository and Clearing Co. , Ltd

3. SD&C’s Technical Systems ●Main n Systems, located in different cities Clearing and Settlement System of SD&C Shenzhen Branch Clearing and Settlement System of SD&C Shanghai Branch Clearing and Settlement System for Open-end Funds(Beijing) ●Other n n systems Data Warehouse System E- Vouchers Management System Office Automation System Web Service System China Securities Depository and Clearing Co. , Ltd

3. SD&C’s Technical Systems(Continued) ●Technical Architecture of Main Systems Trading system of SSE Clearing&Settlement System in Shanghai Trading system of SZSE Clearing&Settlement System in Shenzhen Clearing&Settlement System for Open-end Funds PROP Shanghai Participants （Brokers、Funds、 Banks etc） D-COM/IST Shenzhen Issuers SSCC System Investors Web System The Authorities Data Warehouse SD&C business staff China Securities Depository and Clearing Co. , Ltd

3. SD&C Shenzhen , for instance ●The Shenzhen Application Systems Monitoring System Office Automation Batch Processing System(mainboard) Batch Processing System(Third board) Real-time Account Opening System Statistics System E-Vouchers System Management System Data Communication System (D-COM/IST—Integrated Settlement Terminal ; TCP/IP) Participants、Shenzhen Stock Exchange、 The SD&C Headquarter The SD&C headquarter、SD&C Shanghai Branch China Securities Depository and Clearing Co. , Ltd

3. SD&C Shenzhen , for instance(Continued) ●The Shenzhen Application Systems (in more detail) n Batch Processing System(mainboard and 3 rd board) : the centralized system respectively for clearing and settlement of all securities listed in Shenzhen Market and those delisted securities n Statistics System: for storage of business data in history and providing functions such as query、statistics and analysis and so on. n Data Communication System: D-COM is an integrated communication system for participants, IST is an application terminal built on D-COM. (main functions: real-time account opening、B share Communication、Real-time non-trade businesses、Settlement data、 Capital transfering) And some settlement data are dispatched by SSSCC directly. n Office Automation System: to realize interior office automation as well as work-flow with the headquarter or Shanghai Branch n Monitoring System: to monitor hardware infrastructure and application systems to prevent system risks n In addition, the Backup System for Emergency: to make sure smooth running of production systems to support core businesses in case of emergency. China Securities Depository and Clearing Co. , Ltd

4. SD&C’s Linkage with others ●with n n Clearing and Settlement Systems of SD&C Shenzhen Branch and Shanghai Branch receive trading data from the trading systems in Shenzhen Stock Exchange and Shanghai Exchange respectively SD&C transfers risk monitoring data to Stock Exchanges for real-time monitoring. E. g. short-selling is prohibited. ●with n Stock Exchanges participants After post-trade processing , SD&C will transfer clearing and settlement data to participants , e. g. brokers（ including brokers in Hongkong, B shares）、funds、 banks etc. China Securities Depository and Clearing Co. , Ltd

4. SD&C’s Linkage with others (Continued） ●Web n Investors 、security issuers、participants can access certain information through the Web Systems ●for n connection surveillance Data warehouse system provides surveillance data for the authorities ●TA connection The Transfer Agency system(for open-end funds) in Beijing interconnect with Funds , banks and security brokers ●Iner-connect within SD&C n The headquarter、Shenzhen Branch and Shanghai Branch inter-connect with each other for certain business data transfer and common office automation flows n China Securities Depository and Clearing Co. , Ltd

5. CSD linkage status quo No deep linkage between SD&C Shanghai and SD&C Shenzhen n The two branches act as separate CSD for each market , in fact n In the past , cooperated on certain businesses， such as IPO according to market values. n Broker’s money for settlement can be transferred between each other ● No much cross-border trading currently ● n n ● Only B-share for cross-border brokers and investors in the great China area. Some new products such as cross-border ETFs are under researching No cross-border linkage between CSDS China Securities Depository and Clearing Co. , Ltd

6、Future Landscapes ●To construct Advanced Clearing Technology System accomodating different markets at home n Support all functions of Shanghai、 Shenzhen and Beijing Systems n Support all functions of the new generation trading system of SSE and SZSE n Fulfill new business rules on stock markets of China in the future n Accomodating international standards n Complete risk management system n Adopt mainstream technical architecture China Securities Depository and Clearing Co. , Ltd

4、Future Landscapes(Continued) n n n n Support derivatives Support loan of securities Providing enhanced service for participants and investors Support clearing and settlement of ex-exchange securities Support direct or indirect possessing of securities Comparatively independent registration and depository system Support flexible accounts Support multi-market、multi-currency and crossborder trading China Securities Depository and Clearing Co. , Ltd

4、Future Landscapes(Continued) Support a variety of clearing and settlement style, eg. Real-time or multi- batch processing, net or non-net etc. n Interconnect with international counterparts Or strengthening inter-linkage and cooperation between the Shanghai and Shenzhen markets n Strengthen broker’s money usage efficiency between different markets n Realizing mutual listing maybe n ● China Securities Depository and Clearing Co. , Ltd

4、Future Landscapes(Continued) ● Strengthening inter-linkage between SD&C CSD and China Government Securities Depositary Trust and Clearing Co. , Ltd n To facilitate transferring of government bonds between the two corporations China Securities Depository and Clearing Co. , Ltd

4、Future Landscapes(Continued) ● Researching how to strengthening linkage and cooperation between the mainland China markets and Hong Kong、Southeast-asia markets n Mechanics of mutual linkage , the roles and architecture of Stock exchanges、CSDs、 Clearing houses n Legal basement differences , different systems and definition n Difference of depository models , direct or indirect holding n Difference of Settlement cycles, T+1, T+2 or otherwise n International standards and data transfer protocols，etc. China Securities Depository and Clearing Co. , Ltd

中国证券登记结算有限责任公司 China Securities Depository&Clearing Co. , Ltd （SD&C） Thanks 谢 谢！