HKSAR Government Announced the Launch and Subscription of iBond Series Retail Bonds

The HKSAR Government has set up its retail bond issuance programme to issue retail bonds to the public in Hong Kong in order to promote investor awareness and interest of the bond market in Hong Kong. The programme is designated to issue government bonds in a systematic and consistent manner.

The government has announced the launch of the inflation-linked retail bond (“iBond”) for subscription by Hong Kong residents in July 2011. The maximum issuance size of the iBond will be HK$10 billion having a maturity of three years due 28 July 2014. Bond holders will be paid interest once every six months at a rate linked to inflation in Hong Kong, subject to a minimum of 1%.

The interest rate for each interest payment date will be determined on the relevant interest determination date as the higher of: (i) the floating rate calculated at the arithmetic average of the year-on-year rates of change in the 2009/10-based Composite Consumer Price Index (“CPI”) for the 6 most recent preceding months; and, (ii) the fixed rate of 1.00% per annum, payable every 6 months in arrear. CPI is complied and published by the Census and Statistics Department of HKSAR Government to measure the changes during a specified period in the price level of consumer goods and services generally purchased by households. The year-on-year rate of change in the CPI is widely used as an indicator of the level of inflation. According to government statistics, the year-on-year rate of increase in the Composite CPI in May 2011 and its arithmetic average over the first 5 months in 2011 were 5.1% and 4.24% (i.e. the underlying inflation rates) respectively. Analysts projected that the first interest payment to be received on 30 January 2012 will be approximately HK$250 for iBond subscribed in every principal amount of HK$10,000.

Application has been made to the Stock Exchange of Hong Kong for permission to deal in, and for listing of, the iBonds and are expected to be admitted to listing on 29 July 2011. Listed iBond will be traded in units of HK$100 each in principal amount and each trading lot of the bonds has 100 units (i.e. one trading lot is equivalent to HK$10,000 in principal amount of iBond).

The stock code for listing will be 4208.

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