Amendments to the Hong Kong Code on Takeovers and Mergers to become effective on 1 May

The Securities and Futures Commission announces that amendments to the Hong Kong Code on Takeovers and Mergers (the Takeovers Code) relating principally to Exempt Fund Managers and Exempt Principal Traders will be published in the Government Gazette on 27 April 2001. These amendments have been adopted after the Commission consulted investment advisers and legal advisers actively involved takeover transactions in Hong Kong. The amendments will become effective on 1 May 2001.

The Takeovers Code provides power to the Takeovers Executive to grant one-off exemptions in respect of certain disclosure and dealing requirements under the Takeovers Code. The Executive has developed a practice in this area in view of the multi-service financial organisations and the fiduciary duties that fund managers owe to their fund clients. The amendments to the Takeovers Code are introduced so as to codify these exemptions.

Under the new provisions, exemption from disclosure and dealing requirements under the Takeovers Code are made available to entities within the financial adviser's groups which manage investment accounts on a discretionary basis and which maintain an acceptable standard of efficient Chinese Wall and compliance. Exempt Fund Managers will not be presumed to be acting in concert with any offeror or the offeree company nor will their dealings affect any offeror or the offeree company. To protect the interests of the fund, Exempt Fund Managers will only be required to disclose dealings privately to the SFC during an offer period.

The concept of Exempt Principal Traders will also be introduced in the Takeovers Code. Subject to public disclosures and other restrictions, Exempt Principal Traders which conduct the necessary trading in their ordinary course of trading business, particularly arbitrage or hedging related activities, will be exempted from concert party presumption. Applicants applying for Exempt Fund Manager or Exempt Principal Trader status under the Takeovers Code are required to cover a checklist of questions which will form the basis for the SFC's approval. This checklist is contained in guidelines issued by the SFC (as attached) and posted on the SFC web-site (http: //www.hksfc.org.hk). The opportunity is also taken to streamline the disclosure procedures under the Takeovers Code. In particular, the new provisions will allow disclosures to the SFC to be made in the electronic form.