Revocation of Recognition of DCR's Ratings for Profits Tax Concession Purpose

The Hong Kong Monetary Authority (HKMA) announced today that following the recent acquisition of Duff & Phelps Credit Rating Co. (DCR) by Fitch IBCA Inc. (Fitch IBCA) and the full integration of the two agencies' operations on 1 June 2000, the recognition of the ratings of DCR for the purpose of the profits tax concession scheme under section 14A(4)(b) of the Inland Revenue Ordinance has been revoked with immediate effect.

The HKMA further noted that the ratings issued by DCR and Fitch IBCA have been merged into a single set of ratings, to be maintained by Fitch IBCA operating under the business name of Fitch as from 1 June 2000. Please refer to Fitch IBCA's rating announcements for more details.

Under the profits tax concession scheme, which came into effect on 24 May 1996, interest income and trading profits derived from eligible debt securities are entitled to a concessionary tax rate equal to 50% of the prevailing profits tax rate. To be eligible, a debt issue should, among other criteria, possess a minimum credit rating from a rating agency recognised by the HKMA.

Subsequent to the revocation of DCR's status as a recognised credit rating agency, there are five existing credit rating agencies which have been recognised by the HKMA for the purpose of the profits tax concession scheme since May 1996:

The HKMA reserves the right to make adjustments to the list of recognised rating agencies and the minimum rating requirements from time to time.

Hong Kong Monetary Authority

5 June 2000