FAQs on AIR AUTH B2608 (04701.HK) retail bonds

1. What are Hong Kong International Airport retail bonds (the "Bonds")?

The Bonds are issued by the Airport Authority Hong Kong (AA), a statutory body wholly owned by the Hong Kong SAR Government. Established in 1995, the AA is responsible for the operation and development of Hong Kong International Airport (HKIA). The Bonds are typically used as a fund-raising tool to finance development projects, infrastructure improvements, or other operational-related expenses.

2. How to access the application page?

To apply for the Bonds in the Futubull app, go to:

Markets > HK > IPOs

Note: To apply for the Bonds through Futu, applicants must hold a securities account with Futu HK.

3. What is the subscription schedule?

Subscription Period: January 17, 2024, 10:00 AM to January 25, 2024, 10:30 AM

Allotment Results: on or before February 5, 2024

Issue Date: February 5, 2024

Listing Date: February 6, 2024

Note: The above time is based on Hong Kong Time.

4. Are there any requirements for the subscription amount?

The amount of each lot is 10,000 HKD. You may select a specific lot size on the subscription page.

5. What is the bond maturity date?

The maturity date is August 5, 2026, with interest being paid every 3 months. If any of the dates is not a business day, it shall be postponed to the next business day.

6. What is the interest rate?

4.25% per annum, payable every three months in arrear.

The Bonds will be offered at 100% of the principal amount of the Bonds and, as a result, at issue the interest rate shall be equal to the yield of the Bonds. As the Airport Authority pays annual interest on the Bonds on a quarterly basis, your effective annualized yield may be slightly higher than the stated interest rate (because of the time value of money) as you receive one-quarter of the annual interest every three months.

7. How is interest calculated?

The interest payable for each Bond during an Interest Period will be calculated by multiplying the interest rate, the principal amount of the Bonds, and the number of days in the Interest Period. The resulting amount will then be divided by 365 days.

For example, if you hold 1 lot of Bonds, the first Interest Period will run from February 5, 2024 (inclusive) to May 5, 2024 (exclusive). The interest payable for this period will be calculated as follows: 4.25% x 10,000 x 90/365 = 104.79 HKD (rounded to two decimal places).

8. What are the interest payment rules?

The Bonds shall bear interest at an interest rate of 4.25% per annum from and including February 5, 2024 (the “Issue Date” or the “Interest Commencement Date”), payable quarterly in arrear on the dates shown in the table below. If any interest payment date is not a business day, the relevant interest payment date shall be postponed to the next day which is a business day unless it would thereby fall into the next calendar month in which event it shall be brought forward to the immediately preceding business day.

9. What is the allotment mechanism?

The Airport Authority aims to issue 5 billion HKD worth of bonds and adopts a mechanism that prioritizes applications with a smaller subscription amount.

* For the sake of fairness, all duplicate applications will not be accepted. Investors can only submit their applications through one designated bank or securities broker.

10. Who is eligible to apply for the Bonds?

Individuals with a valid Hong Kong ID card are eligible for the application. Each applicant can only submit one application, and any duplicate application will not be accepted.

Notes:

• Non-permanent Hong Kong residents holding a Hong Kong ID card can also apply for the Bonds.

• Applications from US nationals or Canadian residents will not be accepted.

11. What are the subscription methods?

You may use standard subscriptions or bank-financed subscriptions.

Both Futu financing and bank financing are supported. Futu financing takes into account your unsettled funds and your stock holdings as collateral.

If you have enabled unified buying power, the assets you hold in your US stock or China A-Shares accounts will also be considered as collateral and can contribute to your buying power when subscribing to the Bonds.

12. Is financing supported?

You may use unified buying power (i.e. Futu financing ) or bank financing to participate in the subscription.

13. Is there any interest charged on Futu financing?

Prior to the payment day, your subscription funds will be frozen and no interest will be incurred. Futu financing will be used only if your withdrawable cash on the payment day is less than the amount required when you are allotted shares. The interest generated by using Futu financing will be settled monthly and will be shown in the statements of your HK margin account. Usually, the interest rate is 6.8% per annum. You may borrow or repay a financing loan at any time. As long as you have enough cash withdrawable in your account at the time of debiting funds for the allotment, no financing interest will be charged.

14. When does the subscription period end at Futu, and when will the subscription funds be debited?

The subscription period is from January 17, 2024, 10:00 AM to January 25, 2024, 10:30 AM.

Standard subscriptions will be submitted in batches. The subscription period usually ends at 9:00 AM on January 25, with some exceptions that may end at 10:30 AM.

For bank-financed subscriptions, the subscription period ends one trading day earlier at 4:00 PM on January 24, 2024.

Payment will be made from 9:00 AM on the day the subscription ends if the application has been submitted beforehand. For applications submitted between 9:00 AM 10:30 AM, payment will be made from 10:30 AM. After the funds have been debited, you will not be able to modify or cancel your application.

15. How to check the allotment results?

The allotment results are expected to be announced on February 5, 2024. To check the results in the Futubull app, go to Markets > IPOs > History.

16. Can I participate in the subscription using money market funds?

You can redeem your money market funds to subscribe to the Bonds.

Alternatively, if you have activated SmartSave-Redeem, the system will redeem the money market funds automatically for you to subscribe to the Bonds.

17. Is grey market trading supported?

Grey market trading hours for the Bonds are from 4:15 PM to 6:30 PM on February 5, 2024. If the day adopts half-day trading, the grey market trading hours are from 2:15 PM to 4:30 PM.

18. Where can I get more information about the Bonds?

To learn more about the Bonds, visit the website of Airport Authority Hong Kongor the website of HKEX

19. How much interest can I earn if I subscribe to the Bonds now and hold it until maturity?

If you hold one lot (i.e. 10,000 HKD) of the Bonds until maturity, the interest is approximately 1062.5 CNY.

20. How to redeem the Bonds?

You have the right to redeem the Bonds early before they mature. However, you must submit the redemption request by sending us an email within the specified time (30 to 60 calendar days before the interest payment date). We will follow the Hong Kong settlement process and then submit the early redemption request to the Airport Authority.

Send an email to CS01@Futuhk.com to request an early redemption.

Subject: Redemption of Hong Kong International Airport retail bonds.

Body text:

       Name:

       User ID:

       Bond code: 04701.HK

       Number of shares to be redeemed:

       I acknowledge and accept the early redemption fee of 500.00 HKD and authorize the deduction of the related charges from my account.

Redemption arrival date: Interest payment date of each quarter.

Redemption amount: 100% of the principal amount together with the accrued interest.

Notes:

1. You must submit the redemption request using your registered email for account opening. Requests submitted from non-registered email addresses will not be processed.

2. Each early redemption request fee is 500.00 HKD, which will be deducted from your securities account when the Bonds are redeemed. For details, click here.

3. Redemption requests submitted outside the time listed in the table below will not be accepted. In case of a Hong Kong public holiday or weekend, the available redemption time will be advanced to the preceding business day.

4. Once your redemption request is accepted, we will deduct the number of bond shares from your holdings and distribute the bond principal and interest to your securities account within 2 business days of the quarterly interest payment date.

5. We process early redemption requests at 12:00 noon on business days. If you submit an early redemption request after that, the request will be processed on the next business day. If the next working day is not within the available redemption time, your request will not be processed.

6. The number of shares to be redeemed must be a multiple of 100.

Early redemption email example

• Subject: Application for Hong Kong Airport Authority Bond Redemption

• Body text:

    Name: Jack Smith

    User ID: 1234567

    Bond code: 04701.HK

    Number of shares to be redeemed: 100 shares

    I acknowledge and accept the early redemption fee of 500.00 HKD and authorize the deduction of the related charges from my account.

Redemption request processing outcome:

Note: The above examples are for reference only. Actual situations may vary due to public holidays or weekends in Hong Kong. If your early redemption request is accepted, please refer to your daily statement for details. If you have any questions, please contact our customer service team.

21. How is interest calculated when trading in the secondary market?

If you are the buyer, in addition to the transaction fees, you will need to pay the seller the interest accrued from the previous interest payment date (inclusive) to the settlement date (exclusive) of the bond transaction.

For example, if you buy 1 lot of the Bonds from a seller for 10,000 HKD on March 5, 2024, and the transaction settles on March 7, 2024, you'll need to pay the seller interest, along with the bond value and transaction fees. The interest calculation period runs from the bond issue date of February 5, 2024 (inclusive), up to the next interest payment date of March 7, 2024 (exclusive), covering a total of 31 days. The interest is calculated as 4.25% x 10,000 x 31/365, which is 36.10 HKD.

22. Is a valid Hong Kong ID card necessary to trade in the secondary market?

You don't need a Hong Kong ID card to trade the Bonds in the secondary market.

[Risk Disclosure] The above FAQs are for reference only, and Futu shall not be held liable for any of the content. For more details about the Bonds, visit here.