Convertible bonds are one kind of special enterprise bonds that can, under given conditions, be converted into common stocks at any given time. A convertible bond has the features of both bonds and stocks, with the following three characteristics:

1. Debt: Similar to other bonds a convertible bond provides an interest rate and interest term, and the investor may choose to hold the bond until maturity and collect the principal and the interest.

2. Equity: A convertible bond is a pure bond (creditor) before being converted into stocks, but after it is converted the former bond holder will become a shareholder of the company.

3. Convertibility: A convertible bond clearly stipulates at the time of issuance that any bond holder may convert the bond into the company¡¯s common stocks according to a price as agreed upon at the time of issuance.