Floating Rate Bond delivers regular income to its investors with coupon rate moving along with the market interest rate.

The Benefit of Floating Rate Bond:

• Higher interest return potential
• Potential capital gain

* Yield-to-Maturity (YTM) refers to the rate of return where a bond is bought and held until maturity

Example

Suppose Miss Lee has used a deposit to invest in a 3-Year Floating Rate Bond with a Face Value of US$200,000 at market price at US$100 in November 2004, and coupon rate of 3-month USD London Interbank Offer Rate (LIBOR) + 7 basis points (bp). This bond has the following features:

3-month USD LIBOR on day of purchase is 1.11%. Coupon rate is 1.11%+ 0.07%= 1.18%. p.a.

Interest Return for the 1st 3-month period: US$200,000 x 1.18%x 3/12 = US$590

3 months later: 3-month USD LIBOR rises to 1.54% p.a. Coupon rate becomes 1.54%+ 0.07% = 1.61% p.a.

Interest Return for the next 3-month period: US$200,000 x 1.61% x 3/12 = US$ 806

The 3-month USD LIBOR of the subsequent 9 quarters rose continuously from 1.61% p.a. to 5.46% p.a.

33 months later: 3-month USD LIBOR rises to 5.36% p.a. Coupon rate becomes 5.36% + 0.07% = 5.43% p.a.

Interest Return for the last 3-month period: US$200,000 x 5.43% x 3/12 = US$ 2,715

Total Interest Return in 3 years is US$21,839.39, and the average annual return is 3.64% p.a.

Risk Disclosure Statement
This page is for information and reference purpose only. Shanghai Commercial Bank (“the Bank”) makes no warranty as to the accuracy or completeness of information provided herein. It neither constitutes a solicitation nor an offer with respect to the purchase or sale of any security. Bond investments are not bank deposits and involve risks, including the possible loss of the principal amount invested. Investors investing in bonds denominated in non-local currency should be aware of the risk of exchange rate fluctuations that may cause a loss of principal. Unless specified, these investments are not obligations of or guaranteed by the Bank. US persons are not eligible. Bond prices may go down as well as up. The Bank accept no liability for any direct or consequential loss arising from this page. The Bank does not guarantee the existence of a secondary market for bonds.