In today's environment, the most successful businesses will be those that are able to motivate their employees to greater innovation and enterprise. Performance-linked compensation systems, such as employee stock option schemes, can be powerful tools to achieve this objective.

As a special provision for start-ups, I introduced the Entrepreneurial Employee Stock Option Scheme last May where 50 percent of stock option gains is exempted from income tax for employees of such companies.

At that time, I indicated I would introduce a separate scheme that would be available to the more established companies. Today, I am glad to announce the "Company Stock Option" scheme, or the CSOP scheme for short.

Under the scheme, income tax exemption will be granted for up to $1 million worth of stock option gains arising from the exercise of the employee's options over a 10-year period. Out of the $1 million, the first $2,000 worth of gains each year will be given 100 percent tax exemption. This makes the scheme very attractive for the lower-paid employees. In addition, I have also decided to exempt from income tax 25 percent of the remaining gains. Coupled with the absence of capital gains taxes and our low personal tax rates, the taxation of employee stock option gains in Singapore will be very attractive.

The CSOP scheme will be available to all companies that meet certain conditions. One key condition that companies have to satisfy before they can qualify for the scheme is that they will have to offer the stock options to at least half the employees in the company. This is to encourage companies to provide the benefits of the scheme to lower-paid workers as well. The scheme will be available to options granted with effect from 1 April 2001. Details of the scheme can be found in Annex 1.