The following is the text of a press release issued today by HSI Services Ltd. ***** HANG SENG INDEX COMPILATION METHODOLOGY

Transcription

1 30 June 2006 The following is the text of a press release issued today by HSI Services Ltd. ***** HANG SENG INDEX COMPILATION METHODOLOGY Further to its announcement of 12 May 2006, HSI Services Limited ( HSI Services ) has discussed possible changes to the Hang Seng Index ( HSI ) compilation methodology with a wide range of market participants. After considering their opinions and consulting the HSI Advisory Committee, HSI Services today announced details of the changes that will be made. Compilation Methodology The compilation of the HSI will be switched from a full market capitalisation weighted formula to a freefloat-adjusted market capitalisation weighted formula with a cap on individual stock weightings. Details are as follows: News Release a) Freefloat adjustment: A Freefloat-Adjusted Factor ( FAF ) will be assigned to each constituent in index calculation. The freefloat definition has been revised to exclude shareholdings with a lock-up arrangement (see Appendix 1). b) Cap: A 15% cap on individual stock weightings will be applied. c) Re-capping frequency: A re-capping exercise will be conducted semi-annually in Q1 and Q3 to coincide with the regular update of the FAF. Additional re-capping will be performed should there be constituent changes. The above changes will be phased in over a period of 12 months from September 2006 to September 2007 to ensure a smooth transition and to minimise any impact on the market. The timetable and adjustments are as follows: After Market Close on Freefloat Adjustment Capping Level Phase 1: Nil 25% 8 Sep 2006 (Fri) Phase 2: 9 Mar 2007 (Fri) Applying 2/3 Freefloat Adjustment (FAF 1 ), 20% Phase 3: 7 Sep 2007 (Fri) Where: 2 FAF1 = 100% ( 100% FAF 2) 3 Rounded up to the nearest 5% Applying full Freefloat Adjustment (FAF 2 ) 15% For new constituents entering the HSI, the FAF will be applied in full at the time of entry. more This news release is issued by HSBC Holdings plc Registered Office and Group Head Office: 8 Canada Square, London E14 5HQ, United Kingdom Web: Incorporated in England with limited liability. Registered number

2 Hang Seng Index Compilation Methodology / 2 Inclusion of H-share Companies in the HSI As decided in February 2006, Mainland enterprises that have an H-share listing in Hong Kong will be eligible for inclusion in the HSI when they meet any one of the following conditions: 1. The H-share company has 100% of its ordinary share capital in the form of H- shares which are listed on the Stock Exchange of Hong Kong; 2. The H-share company has completed the process of Share Reform, with the result that there is no unlisted share capital in the company; or 3. For new H-share IPOs, the company has no unlisted share capital. Eligible H-share companies will enter the stock universe for the regular HSI review in August For any H-share companies included in the HSI, only the H-share portion of the share capital of the company will be used for index calculation, subject to freefloat adjustment. Number of Constituents with Inclusion of H-share Companies In order to ensure that the HSI will remain broad-based enough to represent the Hong Kong equity market following the inclusion of eligible H-share companies, it has been decided that the number of constituents will be gradually increased. As an interim measure, any H-share company joining the HSI will result in a net increase in the number of HSI constituents. The number of non-h-share constituents will be maintained at 33. HSI Services will further announce the way ahead with regard to the number of index constituents once the fifth H-share company joins the HSI bringing the index to 38 constituents. Note to editors: Information on HSI Services Limited The Hang Seng Family of Indexes is managed and compiled by HSI Services Limited, which is a whollyowned subsidiary of Hang Seng Bank. The members of the index family include the Hang Seng Index, Hang Seng Composite Index Series, Hang Seng Freefloat Index Series and Hang Seng Total Return Index Series. For further information on the Hang Seng Family of Indexes, please visit the company's website at more

3 Hang Seng Index Compilation Methodology / 3 Information on HSI Advisory Committee HSI Services Limited has appointed an independent advisory committee which includes specialists drawn from the Hong Kong SAR Government, universities, the legal and accounting professions, institutional investors and investment consultants. The Committee meets regularly to discuss matters pertaining to the indexes, including changes of constituents and the launch of new indexes. Information on Index Review The Hang Seng Index is reviewed quarterly. The Hang Seng China Enterprises Index and Indexes in the Hang Seng Composite Index Series and the Hang Seng Freefloat Index Series are reviewed on a semiannual basis. The review will normally be completed within six weeks after the end of each calendar quarter. ***** ends/all more

4 Appendix 1 Definition of Freefloat-Adjusted Factor A Freefloat-Adjusted Factor ( FAF ) will be devised to represent the portion of freefloat shares after excluding the following four groups of shareholdings: (a) Strategic holdings Shares held by strategic shareholder(s) who individually or collectively control more than 30% of the shareholdings; (b) Directors holdings Shares held by director(s) who individually control more than 5% of the shareholdings; (c) Cross-holdings Shares held by a Hong Kong-listed company which controls more than 5% of the shareholdings as investments; and (d) Lock-up shares Shares held by shareholder(s) who individually or collectively represent more than 5% of the shareholdings in the company and with a publicly disclosed lock-up arrangement. The FAF will be rounded up to the nearest 5% for index calculation. Impact on Hang Seng China Enterprises Index ( H-shares Index ): The revised freefloat definition will also be applied to the H-shares Index starting from the August 2006 review. All other things being equal, China Construction Bank (939) will be the only constituent affected by the revision, and the revised FAF will be 15%, compared with the existing 30%.

5 Appendix 2 Indicative FAFs in Different Phases for the Existing HSI Constituents FAF(%) Code Company Name Phase 1 FAF 1 at Phase 2 FAF 2 at Phase 3 (8 Sep 2006) (9 Mar 2007) (7 Sep 2007) 1 Cheung Kong CLP Holdings HK & China Gas Wharf (Holdings) HSBC Holdings HK Electric PCCW Hang Seng Bank Henderson Land Hutchison SHK Properties New World Development Swire Pacific 'A' Bank of East Asia MTR Corporation Sino Land Hang Lung Properties China Merchants Holdings Johnson Electric CITIC Pacific China Resources Cathay Pacific Air Esprit Holdings Li & Fung Yue Yuen Industrial China Unicom CNOOC China Netcom China Mobile Lenovo Group CKI Holdings COSCO Pacific BOC Hong Kong Note: 1. Actual FAF 1 to be used will be announced in February Actual FAF 2 to be used will be announced in August 2007.

6 Appendix 3 Indicative Weightings of Existing HSI Constituents (Based on Closing Price on 27 June 2006) Existing (Full MV Weighted) Weighting (%) Freefloat-adjusted with a Cap Phase 2 (9 Mar 2007) Phase 1 (8 Sep 2006) Phase 3 (7 Sep 2007) Code Company Name Finance HSBC Holdings Hang Seng Bank BOC Hong Kong Bank of East Asia Utilities CLP Holdings HK & China Gas HK Electric Properties SHK Properties Cheung Kong Henderson Land Hang Lung Properties Sino Land Commerce & Industry China Mobile Hutchison CNOOC MTR Corporation China Unicom China Netcom Swire Pacific 'A' Esprit Holdings Wharf (Holdings) CKI Holdings China Merchants Holdings Li & Fung CITIC Pacific Cathay Pacific Air New World Development PCCW COSCO Pacific China Resources Yue Yuen Industrial Lenovo Group Johnson Electric Total