Page 91 - DBP5043

TYPES OF NEGOTIATED FINANCING:

1. Commercial paper

The usage of Commercial paper as a source of short-term financing in
Malaysia has not been widely spread. This is because only companies
with strong financial standing are able to produce CP. CP is issued by
the company to obtain short-term financing in a short period of time.

Commercial paper is a short-term promissory note, issued by big and
famous companies that have gained the confidence of investors who
believe the company's ability to repay them when redeeming their
commercial paper at maturity.

Typically, the commercial paper is issued at a discount. This means
that when sold to investors, the price will be deducted by the interest.
At maturity, the investor will redeem at face value. In this case, the
issuer of commercial paper is the borrower and the investor is the
lender.

An additional feature is the existence of the Commercial Paper
issuance costs as a third party (bank or service security company
operator) to distribute such Commercial Paper to the public in
addition to other costs that are directly involved in the issuance of
Commercial Paper. All these costs must be taken into account in
calculating the EC.

The calculation of EC for the issuance of commercial paper are as
follows:

EC = Total Cost
Net Loan x Time

Total cost = Issuance cost + Interest
Net Loan = Value of Commercial Paper - Total cost