The 8th Non-competitive Tender for Exchange Fund Notes

The Hong Kong Monetary Authority (HKMA) announced today (Tuesday) that the 8th non-competitive tender for Exchange Fund Notes under the Pilot Scheme for promoting Exchange Fund Notes to the retail market will be held on 22 July 2004. Up to HK$120 million of an existing 5-year Note (issue no. 5709) with remaining term to maturity of about 38 months will be reopened and on offer for non-competitive tender. The issue will mature on 17 September 2007 and will carry interest at the rate of 3.07% per annum payable semi-annually in arrears. Interest payments and redemption payment on the issue are shown in the schedule attached as Appendix 1.

Investors wishing to participate in the non-competitive tender can apply for the issue between 13 July 2004 and noon 20 July 2004 through the Retail Exchange Fund Notes Distributors (Distributors) appointed by the HKMA, namely Bank of East Asia, DBS Bank (HK) and Wing Lung Bank. The subscription price of the issue will be fixed and announced on 22 July 2004. Allotment will be done on 23 July 2004.

The upcoming issue on offer for non-competitive tender is a reopened issue and this bears a special feature. As the allotment date (23 July 2004) of the issue falls between two coupon payment dates, successful bidders will, in line with standard market practice, have to pay to the HKMA the subscription price plus an amount equal to the interest accrued from the last coupon payment date (16 March 2004) to the allotment date (23 July 2004) of the issue. The amount of accrued interest payable on the allotment date (23 July 2004) is HK$542.51 per HK$50,000 nominal value of the issue. This amount of interest paid will be recovered as part of the interest that the holder receives on the next coupon payment date of 16 September 2004 for the interest earned on the issue in the preceding six months (i.e. between 16 March 2004 and 16 September 2004).

The HKMA launched the Scheme on 1 August 2003 for a 1-year trial period whereby a portion of each quarterly issue of 2-year and 3-year Notes will be made available for non-competitive tender by retail investors through the Distributors. The trial period will end upon the completion of this tender. In addition, the Distributors will adhere to a number of unified standards in the distribution of Exchange Fund Notes to retail investors in the secondary market.

Hong Kong Monetary Authority
6 July 2004

Appendix 1

Schedule of interest payments and redemption payment of
Exchange Fund Notes Issue Number 5709

For per nominal HK$50,000 of Exchange Fund Notes Issue No. 5709

*If the specified interest payment dates and redemption date of the Notes for any reason (e.g. typhoon) is not a business date, the relevant interest payments or redemption payment will be postponed to the immediately succeeding business day (other than a Saturday). The amount of the relevant interest payments will be adjusted to include the interest accrued during the deferred period.