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Belgium

New rules for reverse convertible or exchangeable notes

On June 19 2000 the Belgian Banking and Finance Commission issued a new circular intended to standardize the approval of the contents of prospectuses published regarding the public issuing of reverse convertible (or exchangeable) notes on shares indices or rate of exchange.

From a technical point of view, this instrument is the combination of a normal bond and the purchase of a put option by an issuer from an investor. The premium paid by the issuer for the put option is included in the high coupon.

The circular requires that the attention of potential investors must be drawn on the risks linked to such financial instruments by the insertion into the prospectus of a standardized text laid down in the circular.

The circular also states that the prospectus must contain enough information about the issuer, the operation, the guarantor (if any), the underlying shares indices or rate of exchange, the put option and the reimbursement.

The information required in the circular is not exhaustive and the commission is able to approve the prospectus on condition that complementary information is provided.

Yvan Stempnierwsky


KPMG Legal Advisers
Brussels
Tel: +32 2 708 4300
Fax: +32 2 708 4444

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