Appointment of Retail Exchange Fund Notes Distributors under a Pilot Scheme to facilitate retail access to Exchange Fund Notes

The Hong Kong Monetary Authority (HKMA) announced today (Friday) that it has appointed the Bank of East Asia, DBS Bank (Hong Kong) Limited and Wing Lung Bank as Retail Exchange Fund Notes Distributors ("the Distributors") under a Pilot Scheme ("the Scheme") to facilitate retail access to Exchange Fund Notes ("the Notes").

Scheduled to launch on 1 August 2003, the Scheme introduces a new arrangement, whereby a portion of each quarterly issue of 2-year and 3-year Notes will be made available for non-competitive tender by retail investors. That is, retail investors can subscribe to the Notes in the primary market without specifying the bid price. Instead, successful non-competitive tenders will be awarded at the average accepted price in the competitive tender. Investors can find the list of the Notes to be tendered in the coming quarter in a Tentative Issuance Schedule for Exchange Fund Bills and Notes (EFBN) released by the HKMA in the second month of each quarter. Detailed information about the Notes on offer will be confirmed and announced seven business days in advance of their tender date. The first tranche of Notes (a 2-year issue) on offer for non-competitive tender is scheduled to be issued on 13 August 2003. Investors can apply for the Notes between 1 August and 8 August through the Distributors.

Apart from the new tender mechanism, the Scheme also facilitates participation by retail investors in the secondary market for the Notes by unifying trading practices and increasing the transparency of the pricing and fee structure. The Distributors undertake to adopt a set of unified trading practices in the distribution of the Notes to retail investors in the secondary market to enhance pricing transparency and facilitate comparison. These standards include:

• setting the minimum investment amount at HK$50,000
• offering quotes for at least the current benchmark Notes, i.e. 2-year, 3-year, 4-year, 5-year, 7-year and 10-year Notes
• providing quotes inclusive of transaction fee
• upon request, disclosing the effective yield after deduction of custody fee for the investment amount specified by a customer
• committing to buy back the Notes from its customers
• arranging designated office(s) to answer enquiries and provide service to retail investors
• disclosing any restrictions related to the investment, such as transfer of the Notes and the relevant charges.

The Distributors will also arrange designated offices, branches or wealth management centres to service retail customers.

The Scheme will be reviewed after one year so that the coverage of the Scheme can be adjusted to take account of the interest of the retail investors.

The Exchange Fund Note Programme was introduced in May 1993. The Notes are Hong Kong dollar fixed income debt securities issued by the HKMA and constitute direct, unsecured, unconditional and general obligations of the Hong Kong Special Administrative Region Government for the account of the Exchange Fund, which was established under the Exchange Fund Ordinance. The minimum denomination of the Notes is HK$50,000 and can be subscribed in integral multiples thereof. The Notes are exempt from profits tax and stamp duty. Since August 1999 the Notes have been listed on the Stock Exchange of Hong Kong.

More information on the Scheme and the Notes can be found at "Exchange Fund Notes: Information for Investors" on the HKMA's website (http://www.hkma.gov.hk).

For further enquiries, please contact:

Hong Kong Monetary Authority

Jasmin Fung, Manager (Press), at 2878 8246 or
Sylvia Yip, Manager (Press), at 2878 1687

Retail Exchange Fund Notes Distributors

The Bank of East Asia: 2211 1333
DBS Bank (Hong Kong) Limited: 2290 8888
Wing Lung Bank: 2526 5555

Hong Kong Monetary Authority
25 July 2003

Annex: Branches of the Retail Exchange Fund Notes Distributors (MS Word, 58KB)