What's a Bond? - By Motley Fool Staff

Most of us have heard of bonds, but many of us don't understand just what a bond is. It's essentially a long-term loan. If a company issues bonds, it's borrowing cash and promising to pay it back at a certain rate of interest.

Bonds sold by the U.S. government's Treasury Department are called "Treasuries." State and local governments issue "municipal bonds," while businesses issue "corporate bonds" (sometimes called corporate "paper"). Companies that may be perceived as low-quality are forced to offer high-interest-rate "junk" bonds to attract buyers. There's a higher risk that someday they won't have the cash to cover interest payments and the bonds will default.

Bond investors receive regular interest payments from the issuer at what is called the "coupon rate." For example, a $1,000 bond with a coupon rate of 10% generates payments of $100 per year. When the bond matures -- after perhaps five, 10, or 30 years -- investors get back their initial loan, called "par value." Most corporate bonds have a par value of $1,000, while government bonds can run much higher.

Sometimes a company will "call" its bond, paying back the principal early. All bonds specify whether and how soon they can be called. Federal government bonds are never called.

To calculate a bond's yield, divide the amount of interest it will pay over the course of a year by its current price. If a $1,000 bond pays $75 a year in interest, its current yield is $75 divided by $1,000, or 7.5%.

Once issued, bonds can be traded among investors, with their prices rising and falling in reaction to changing interest rates. For example, when rates fall, people bid up bond prices. If banks are offering 6%, an 8% bond starts looking good.

In the long run, stocks have outperformed bonds handily. According to Jeremy Siegel's Stocks for the Long Run, from 1802 to 1997 (yes, you read that right -- 195 years), the stock market offered an average nominal annual return of 8.4% per year, compared with 4.8% for long-term government bonds.

Stocks outperform bonds even when you eliminate the 19th-century data. According to Ibbotson & Associates, from 1926 to 2000 (notice that includes the Great Depression years), U.S. Treasury bills returned an average of 3.8% per year, compared with 5.3% for long-term corporate bonds and 11% for stocks. If you had invested $5,000 in T-bills 50 years ago, it would now be worth $33,272. Growing at 11% in stocks, it would be worth $922,824. (From 1926 to 2000, inflation grew at an average rate of 3.1% annually.)

For long-term investors, stocks offer the best potential for growth. Still, it's smart to understand how bonds work before you dismiss them. And also to understand that although stocks may average 11% growth over a long period, over the next five or 10 or even 20 years, the average return may be different.

Article Excerpted from:
http://www.fool.com/News/mft/2006/mft06031603.htm

Company Update: UTAC, SMIC's China venture factory starts output

SINGAPORE, March 17 (Reuters)

The following statement was released by the company:
Semiconductor Manufacturing International (Chengdu) Corporation Holds Grand Opening Ceremony for Assembly and Testing Facility

Shanghai, China. March 17th, 2006- Semiconductor Manufacturing International Corporation (SMIC) held a grand opening ceremony for its semiconductor assembly and testing joint venture with United Test & Assembly Center Ltd based in Chengdu, named Semiconductor Manufacturing International (Chengdu) Corporation, also known as AT2.

Approximately 300 guests, including customers, investors, banks, strategic partners, vendors, industry experts, various government representatives, and Mr. Lee Joon Chung, Group President & CEO of UTAC attended the ceremony.

The assembly and testing facility is located in Chengdu's Special Export Manufacturing Zone. The total land area is 40,668 square meters.

Construction area is 215,000 square meters, including approximately 1,000 square meters of clean room. Investment will amount to approximately US$175 million in the first phase.

As an investment entered by one of the leading foundries in the world, SMIC, and UTAC, a leading semiconductor test & assembly company, AT2 services SMIC's global customers and also China's growing spectrum of semiconductor activities with a comprehensive suite of technology and product.

AT2 has commenced pilot production on TSOP. Initial IC packaging product is expected to focus on TSOP, SO8, TSSOP, PDIP, TO220 and DPAK in the first quarter of 2006 and mass production will be expected to produce up to 10M to 100M pieces chips per month for assembly line according to the requirements of different products.

At the opening ceremony, Dr. Richard R. Chang, President and CEO of SMIC, said, "China has become the largest IC market in the world. With support from our partners and the Chengdu government, we aim to offer a complete turn-key solution in China for our global customers. We are already seeing strong demand for our services and I believe the partnership between SMIC and UTAC will continue to serve the needs from customers here in China and around the world."

"We are delighted that our maiden joint venture with our partner has begun operations and is already seeing strong demand," said Mr. Lee Joon Chung, Group President and CEO of UTAC.

"The semiconductor market in China is growing rapidly and we believe that this new facility will complement UTAC group's existing operations in Shanghai to better serve our customers."

Mr. Ge Honglin, the Mayor of Chengdu, said, "The opening of SMIC (Chengdu) marks the new milestone of SMIC's development in China, and we appreciate the opportunity to cooperate with SMIC. We would continue to try our best to support SMIC's development with highly efficient services to create a good investment environment and infrastructure for corporations in Chengdu."

[Outline of Semiconductor Manufacturing International (Chengdu) Corporation]

Company Name: Semiconductor Manufacturing International (Chengdu) Corporation

Date of Establishment: December 24, 2004

Total Investment: US$ 175 Million

Address: High Tech West Area, Chengdu City, China

Cleanroom Area: Approximately 11,000 square meters

Estimated Production Capacity: 10 to 100 Million chips/month with various products

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