HSBC Asset Management 5 September 2003 HSBC Asset Management (Hong Kong) Limited 15/F Citibank Tower, 3 Garden Road, Hong Kong Telephone: Facsimile: Web site: Hong Kong Baptist University 1998 Superannuation Fund January to July 2003 investment review

HKBU24E_MH08 HSBC Asset Management 2 Agenda Investment performance Market outlook Factors for consideration before switching

HSBC Asset Management HKBU24E_MH08 3 Investment performance

HKBU24E_MH08 HSBC Asset Management 4 Currencies Bonds * Equities ** *Bonds: Salomon Smith Barney World Government Bond Indices **Equities:USA (S&P 500), UK (FTSE-100), Germany (DAX), Japan (Nikkei 225), Hong Kong (HSI), Australia (All Ordinaries), Malaysia (KLSE Composite), Singapore (STI) Source: Thomson Financial Datastream Market statistics: January - July 2003

HKBU24E_MH08 HSBC Asset Management 5 More suitable for risk tolerant staff Balanced Fund More suitable for risk averse staff High Growth Fund Growth Fund Risk (short-term volatility) Global Money Funds (HKD/USD) High Low High Stable Fund Long-term potential return Risk profile of various investment options

HKBU24E_MH08 HSBC Asset Management 6 Source: HSBC Asset Management Past performance is not necessary a guide to future performance Investment performance: January to 27 August 2003

HKBU24E_MH08 HSBC Asset Management 7 Investment performance: January to June 2003 Source: HSBC Asset Management, Thomson Financial Datastream Past performance is not necessary a guide to future performance

HKBU24E_MH08 HSBC Asset Management 8 (3/99) Investment performance since inception (Mar 98 to July 03) Source: HSBC Asset Management, Thomson Financial Datastream Past performance is not necessary a guide to future performance

HKBU24E_MH08 HSBC Asset Management 9 Equities Hong Kong Japan Other Asia Pac N. America Europe Total Bonds US Bonds Non US Bonds Total Cash Equities Hong Kong Japan Other Asia Pac N. America Europe Total Bonds US Bonds Non US Bonds Total Cash HKBUHKBUHKBU HKBUHKBU GMF High GrowthGrowthBalancedStableHKD / USD BmkFundBmkFundBmkFundBmkFundFund (%)(%)(%)(%)(%)(%)(%)(%)(%) Asset allocation – 31 July 2003

HSBC Asset Management HKBU24E_MH08 10 Market outlook

HKBU24E_MH08 HSBC Asset Management 11 US –Due to the impact of combined monetary and fiscal stimulus, economic data continue to improve (i.e. Q2 GDP, ISM, durable goods, factory orders) –Overall corporate earnings results were better than expected –Expecting a stronger growth in H2 driven by short-term rebuilding of inventories –High unemployment rate remains a concern Outlook –Neutral in US –GDP growth forecast for 2003 (+2.2%); 2004 (+3.2%) Data as at 5 August 2003

HKBU24E_MH08 HSBC Asset Management 12 Euroland –Economy remains weak but with improving outlook such as household confidence, IFO & ZEW Surveys –Growth has been downgraded further –Earnings growth improved, driven by a cost cutting rather than top line growth UK Two-tier economy remain: –Robust consumer spending holding up despite some weakness in the housing market –Manufacturing PMI indicates the sector is picking up Outlook –Euroland - moderate underweight; UK - moderate overweight –GDP forecast (2003) : Euroland (+0.7%); UK (1.8%) Data as at 5 August 2003

HKBU24E_MH08 HSBC Asset Management 13 Japan –Experiencing cyclical upswings after years of stagnation –Tankan Survey showed slight improvement, while business conditions were broadly unchanged in the non-manufacturing sector –Revised up our earnings growth forecasts to mid-single digit –Foreign fund managers reducing underweight position –Structural problems remain: rising unemployment and low capacity utilisation Outlook –Underweight in Japan –GDP growth forecast (2003) : 1.0% Data as at 5 August 2003

HKBU24E_MH08 HSBC Asset Management 14 Asia ex-Japan –The economic situation in Asia remains relatively positive –Driven by higher beta, lower quality stocks, this may lead to consolidation –Monetary and fiscal policies remain supportive –Asian economies to benefit from outsourcing trend –Undemanding valuation Outlook –Moderate overweight in Asia (ex Japan) Data as at 5 August 2003

HKBU24E_MH08 HSBC Asset Management 15 Asia ex-Japan Hong Kong (neutral) –Market driven by ample liquidity and improving sentiment –Positive news flow: relaxation of travel arrangement for mainland residents, CEPA initiatives & the construction of bridge linking HK / Macau / China serve as additional catalysts –Remain cautious on the back of subdued economic fundamentals Korea (overweight) –Liquidity and positive performance in US market - main driver of the market –Momentum remains positive as exports continue to be the major growth engine –Monetary & fiscal policy remain accommodative –Earnings upgrade to be witnessed in key technology companies Taiwan (overweight) –Favourable liquidity environment and the potential MSCI review of Limited Investability Factor (LIF) of Taiwan serve as the major drivers to the market –Pre-election pump-priming measures provide further boost to the economy and market sentiment –Concerns: valuation look stretched for selective tech stocks & need to see upward revisions in corporate earnings for a sustainable rally Data as at 5 August 2003

HKBU24E_MH08 HSBC Asset Management 16 Bond market outlook –U.S. : On the back of Greenspan’s recent upbeat comments and better-than-expected economic data reinforced our belief that the rate-cutting cycle has come to an end. We expect no change in interest rates in the 3-month and 12-month period. Our short-to- intermediate view is for falling yields. –Euroland : As economic data continue to display softness, the ECB is expected to reduce official rates by 0.25% in 3 months. Gradual economic recovery forecast for 2004, coupled with low inflation, should keep rates on hold at 1.75% for the 12-month period. With risk premium and flow / market positions becoming more positive, we turn more positive on Euroland bonds. –Japan : We see little chance of any move in short-term interest rates in both the short- and medium-term. Bonds are now more equally valued to equities and real interest rates have risen; we have retained our negative view on the market. Data as at 5 August 2003

HKBU24E_MH08 HSBC Asset Management 17 Asset class rating : JapanEuropeUS, Canada, Australia, HK Equity market rating : UK, Asia (ex Jp/HK), GEM Most preferred market(s) NeutralUnderweightOverweightModerate Overweight Moderate Underweight Overweight Neutral Equities, Bonds & Cash Neutral Equities, Bonds & Cash Underweight Least preferred market(s) HSBC Asset Management Investment Strategy Data as at 5 August 2003

HKBU24E_MH08 HSBC Asset Management 18 Explanatory notes and disclaimers The document is confidential and is supplied to you solely for your information. This document should not be reproduced or further distributed to any person or entities, whether in whole or in part, for any purpose. Please also note that investment involves risk and past performance is not indicative of future performance. The opinions expressed herein should not be considered to be a recommendation by HSBC Asset Management (Hong Kong) Limited to any reader of this material to buy or sell securities, commodities, currencies or other investments referred to herein. HSBC Asset Management (Hong Kong) Limited, its ultimate and intermediate holding companies, subsidiaries, affiliates, clients, directors and/or staff may, at any time, have a position in the markets referred to herein, and may buy or sell securities, currencies, or any other financial instruments in such markets. HSBC Asset Management (Hong Kong) Limited has based this document on information obtained from sources it believes to be reliable but which it has not independently verified. HSBC Asset Management (Hong Kong) Limited and the HSBC Group make no guarantees, representations or warranties and accept no responsibility or liability as to its accuracy or completeness. Information in this report is subject to change without notice.

HKBU24E_MH08 HSBC Asset Management 19 HSBC Asset Management (Hong Kong) Limited

HSBC Asset Management HKBU24E_MH08 20 Factors for consideration before switching

HKBU24E_MH08 HSBC Asset Management 21 Principles of retirement investment 3 major types of investment instruments Equities –Ownership of companies –Returns from dividends & capital appreciation –High short term volatility Bonds –Debt instruments issued by governments/corporations –Returns from interest payments –Short term volatility lower than equities Cash –very low short term volatility

HKBU24E_MH08 HSBC Asset Management 22 Do not time / chase markets! Please remember Identify personal factors –Establish risk / return profile –Understand investment choices –Make investment decisions using a long-term approach

HKBU24E_MH08 HSBC Asset Management 23 Different people have different needs!! A guide to investing Factors to consider –Years to retirement –Other personal assets –Planned uses for retirement assets –Financial and other personal circumstances

HKBU24E_MH08 HSBC Asset Management 24 Therefore Different people have different needs Investment choices are provided for different risk profiles Range of investment choices