February 2003 Hong Kong Baptist University 1998 Superannuation Fund HSBC Asset Management (Hong Kong) Limited 15/F Citibank Tower, 3 Garden Road, Hong Kong Telephone: Facsimile: Web site : 2H 2002 investment review

…………..……………………………………………………………………………………………………………………………………………………………………………………………… HKBU23E_CK02 HSBC Asset Management2 Investment performance Market outlook Factors for consideration before switching Agenda

…………..……………………………………………………………………………………………………………………………………………………………………………………………… HKBU23E_CK02 HSBC Asset Management3 Investment performance

…………..……………………………………………………………………………………………………………………………………………………………………………………………… HKBU23E_CK02 HSBC Asset Management4 *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) Currencies Bonds * Equities ** Market statistics: October to December 2002

…………..……………………………………………………………………………………………………………………………………………………………………………………………… HKBU23E_CK02 HSBC Asset Management5 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) Market statistics: July to December 2002

…………..……………………………………………………………………………………………………………………………………………………………………………………………… HKBU23E_CK02 HSBC Asset Management6 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 LowHigh Stable Fund Long-term potential return Risk profile of various investment options

…………..……………………………………………………………………………………………………………………………………………………………………………………………… HKBU23E_CK02 HSBC Asset Management7 Source: HSBC Asset Management Investment performance: January 2003

…………..……………………………………………………………………………………………………………………………………………………………………………………………… HKBU23E_CK02 HSBC Asset Management8 Source: HSBC Asset Management, Watson Wyatt Managed Fund Report Investment performance: October to December 2002

…………..……………………………………………………………………………………………………………………………………………………………………………………………… HKBU23E_CK02 HSBC Asset Management9 Source: HSBC Asset Management Investment performance: July to December 2002

…………..……………………………………………………………………………………………………………………………………………………………………………………………… HKBU23E_CK02 HSBC Asset Management10 (3/99) Source: HSBC Asset Management Investment performance since inception (Mar 98 to Jan 03)

…………..……………………………………………………………………………………………………………………………………………………………………………………………… HKBU23E_CK02 HSBC Asset Management11 Equities Hong Kong N. America Japan Europe Other Asia Pac Total Bonds US Bonds Non US Bonds Total Cash Equities Hong Kong N. America Japan Europe Other Asia Pac Total Bonds US Bonds Non US Bonds Total Cash HKBUHKBUHKBU HKBUHKBU GMF High GrowthGrowthBalancedStableHKD / USD BmkFundBmkFundBmkFundBmkFundFund (%)(%)(%)(%)(%)(%)(%)(%)(%) Asset allocation – 31 December 2002

…………..……………………………………………………………………………………………………………………………………………………………………………………………… HKBU23E_CK02 HSBC Asset Management12 Market outlook

…………..……………………………………………………………………………………………………………………………………………………………………………………………… HKBU23E_CK02 HSBC Asset Management13 US  Recent data generally positive GDP forecast 2.2% (i.e. ISM 53.9, Personal Spending +0.9%, Unemployment 5.7%, Home Sales 1,082K)  2003 growth more balanced (improvement in business investment)  Fiscal (tax package) as well as Monetary (low interest rates) policies remain supportive  Robust recovery unlikely –Middle East –Low earnings visibility Outlook  Neutral in US  Earnings growth for 2003 (7%)

…………..……………………………………………………………………………………………………………………………………………………………………………………………… HKBU23E_CK02 HSBC Asset Management14 Europe  German economy a concern (weak IFO 87.4/ Unemployment 10.3%)  Rest of Euroland better with France leading the way  ECB fiscal policy restriction (Germany & France - exceed the 3% limit)  Expect Euroland to lag US in global cycle UK  Government spending remains strong and expect to continue  Unemployment remains stable compared to US/Europe  Insurance sector - relaxing solvency ratio by regulators Outlook  Underweight in Europe, overweight in UK  GDP forecast for 2003 (Europe 1.2%, UK 2.5%)

…………..……………………………………………………………………………………………………………………………………………………………………………………………… HKBU23E_CK02 HSBC Asset Management15 Japan  Economic data remain poor (Industrial Production -1.6%, Household Spending -2%, Unemployment 5.4%)  Deteriorating employment picture  Financial reform - do not expect immediate solution  Economy restrained (high uncertainty, weak global growth) Outlook  Underweight in Japan  2003 GDP forecast 0.8%

…………..……………………………………………………………………………………………………………………………………………………………………………………………… HKBU23E_CK02 HSBC Asset Management16 Asia ex-Japan  Favour domestic oriented over export driven stocks  Liquidity remains supportive  Valuations remain cheap and attractive  External risk –Middle East –United States –North Korea Outlook  Overweight in Asia (ex Japan)  Defensive bias over the near term

…………..……………………………………………………………………………………………………………………………………………………………………………………………… HKBU23E_CK02 HSBC Asset Management17 Asia ex-Japan Hong Kong  Outlook for the domestic economy remains subdued ( i.e. unemployment, deflation and property sector)  Concern on government budget deficit  Exports expected to slow down  Market range bound - lack of upside catalyst Korea  Economic growth driven by strong consumer spending and exports  Liquidity and low unemployment rates (2.8%) remain supportive  Concerns - North Korea’s nuclear issue, slowing consumption Taiwan  Performance of the US market (NASDAQ) important  Politics - an area of focus (2004 presidential election)  Short-term focus - non-technology stocks  Remain underweight - looking to the US market for direction

…………..……………………………………………………………………………………………………………………………………………………………………………………………… HKBU23E_CK02 HSBC Asset Management18 Bond market outlook  In the US, we expect the anticipated war with Iraq to be relatively short-lived, and the Fed will have to take back the 50 bps rate cut of last November within 12 months.  In Europe, we anticipate the ECB to sanction an additional easing of 50 bps within the next 3 months, with no further changes forecast over 12 months.

…………..……………………………………………………………………………………………………………………………………………………………………………………………… HKBU23E_CK02 HSBC Asset Management19 Asset class preference : Equities / Cash / Bonds (neutral) Data as at 4 February 2003 Asia ex. HK/JP HKJapanEurope ex. UK USGlobal Emerging Markets least preferred markets Regional investment weightings UKCanadaAustralia Most preferred markets HSBC Asset Management Investment Strategy

…………..……………………………………………………………………………………………………………………………………………………………………………………………… HKBU23E_CK02 HSBC Asset Management20 The document is confidential and is supplied to you solely for your information. This document should not be distributed, must not be reproduced or further distributed to any person or entities, whether in whole or in part, for any purpose. This document can only be given to people to whom the relevant HSBC entity are not prohibited by law to provide discretionary investment service under their respective licences issued by the regulators. This document is not and should not be construed as an offer to sell or solicitation of an offer to purchase or subscribe for any investment. 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. Expressions of opinion herein are subject to change without notice. HSBC Asset Management (Hong Kong) Limited

…………..……………………………………………………………………………………………………………………………………………………………………………………………… HKBU23E_CK02 HSBC Asset Management21 Factors for consideration before switching

…………..……………………………………………………………………………………………………………………………………………………………………………………………… HKBU23E_CK02 HSBC Asset Management22 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 Principles of retirement investment

…………..……………………………………………………………………………………………………………………………………………………………………………………………… HKBU23E_CK02 HSBC Asset Management23 * Calculated in HK$ terms Source: Thomson Financial Datastream Examination of investment markets

…………..……………………………………………………………………………………………………………………………………………………………………………………………… HKBU23E_CK02 HSBC Asset Management24 * Calculated in HK$ terms Source: Thomson Financial Datastream Examination of investment markets – cumulative return

…………..……………………………………………………………………………………………………………………………………………………………………………………………… HKBU23E_CK02 HSBC Asset Management25 Source: Thomson Financial Datastream Dollar Cost Averaging : = +3.6% Buy Sell Buy Sell Maximum Loss : =- 37.5%++ Sell Buy Sell Maximum Profit : =+40.6% + Dollar cost averaging e.g. HSBC Holdings

…………..……………………………………………………………………………………………………………………………………………………………………………………………… HKBU23E_CK02 HSBC Asset Management26 95%Probability Annalised return (%) Source: HSBC Asset Management The more aggressive the fund, the wider the range of likely returns

…………..……………………………………………………………………………………………………………………………………………………………………………………………… HKBU23E_CK02 HSBC Asset Management27 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

…………..……………………………………………………………………………………………………………………………………………………………………………………………… HKBU23E_CK02 HSBC Asset Management28 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

…………..……………………………………………………………………………………………………………………………………………………………………………………………… HKBU23E_CK02 HSBC Asset Management29 Therefore Different people have different needs Investment choices are provided for different risk profiles Range of investment choices