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A Government spokesman announced today (Thursday) that the Financial Secretary, Mr Donald Tsang, had appointed the Directors of the Exchange Fund Investment Limited (EFIL).

The composition of the Board is as follows :-

The Honourable Yang Ti-liang, JP (Chairman)

The Honourable Chan Kam-lam

Mr Norman Chan Tak-lam, JP

The Honourable Edward Ho Sing-tin, JP

Mrs Rebecca Lai Ko Wing-yee, JP

Mr Stuart H Leckie, JP

Mrs Marian Li Chan Sien-mun

The Honourable Eric Li Ka-cheung, JP

Mr Michael J E Thornhill

Professor Tsang Shu-ki

Ms Amy Yip Yok-tak, JP

Commenting on the composition of the Board of Directors, Mr Donald Tsang said: "I am very pleased to have such a distinguished group drawn from different sectors of the community to join the Board of EFIL.

"The Company has been given the important task of safeguarding the value and interests of the substantial portfolio of Hong Kong equities acquired by the Exchange Fund in the recent operation in the stock market.

"I am confident that the Directors will discharge their duties in an exemplary manner."

Mr T L Yang, Chairman of EFIL, said: "I am honoured and delighted to be appointed Chairman of the Company. I look forward to working with the Directors to ensure that the Hong Kong equity portfolio is managed in a prudent and professional manner."

The Directors of EFIL are appointed by the Financial Secretary as shareholders of EFIL on a personal basis. The first Board meeting is scheduled to be held on October 26, 1998.

The principles governing the setting up of EFIL have been set out by the Acting Financial Secretary in his press statement on September 30 (copy annexed below).

Establishment of Exchange Fund Investment Ltd

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The acting Financial Secretary, Mr Rafael Hui, announced today (Wednesday) that the Government will set up a new company called "Exchange Fund Investment Limited" to manage the substantial holding in the Hang Seng Index constituent stocks acquired by the Exchange Fund in the recent stock market operation.

"The new company will act as a fund manager of the Exchange Fund and manage the Hong Kong equity portfolio in accordance with the guidelines issued by the Hong Kong Monetary Authority on the advice of the Exchange Fund Advisory Committee," said Mr Hui.

"To address the concerns on the potential conflict of interest that may arise from the Government's ownership of these shares and the Monetary Authority's role as the regulator of banks in Hong Kong, the new company will have its own board of directors."

"We envisage that the board would have a non-official chairman and that the majority of the directors would be drawn from distinguished members of the community, including members of the Legislative Council," Mr Hui added.

The new company is not expected to engage in active trading of the Hong Kong equity portfolio in order to avoid giving the wrong impression that the Government continues to operate in the stock market indirectly through the new company.

The company is also responsible for safeguarding the interests of the Special Administrative Region Government in these shareholdings and advising the Financial Secretary on major voting decisions which may have significant financial and corporate governance implications.

"Although the new company is not to conduct active trading of the portfolio, it is responsible for identifying value-added opportunities for the eventual disposal of the shares with minimum disruption to the market," Mr Hui said.

"But I must emphasise that the SARG is prepared to hold these shares as a long-term investment and has no intention to dispose of them in a hurry," he noted.

The new company will be a private limited company and will be subject to the full regulation of the Securities and Futures Commission in exactly the same way as any other institutions engaging in similar businesses in Hong Kong.

"The Financial Secretary, Mr Donald Tsang, has already made clear his intention to disclose the Exchange Fund's shareholdings as soon as the market conditions permit. We hope to be in a position to make the disclosure by the time the new company is set up," Mr Hui said.

"We are now finalising the Memorandum and Articles of Association of the company and in the process of constituting the board. If everything goes smoothly, we expect that the new company will be set up by the end of next month," he added.

End/Thursday, October 22, 1998

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