1. HKEx Strategy From 2006 Onwards Paul M Y Chow Chief Executive, HKEx Presentation at the Hong Kong Securities Institute Roundtable Lunch on 1 December 2005

2. 2 1.HKEx’s vision and strategies 2.Progress so far 3. Hong Kong’s relative performance 4.HKEx Plan for 2006 5.Challenges ahead Agenda

3. 3 Market quality is the key of market growth and sustainability Market Quality Investor Confidence Investor Confidence Order flow Market liquidity Market liquidity An open, secure, fair, orderly, efficient and transparent marketplace

4. 4 Focus on quality will lead to global success Building a quality market Becoming a Mainland Partner Consolidation A world-class marketplace for Hong Kong and Mainland China securities HKEx’s VisionThree-pronged strategy HKEx’s vision and strategy, 2004-2006

5. 5 Market policies and developments must be driven by a slim, dedicated and efficient business entity. Progress so far HKEx will continue to improve its operations and offer greater values to its customers. Consolidation Prudent cost controls Streamlined project portfolio Reorganisation and staff consolidation Staff training and career development Integrating business operations and policies Strengthening staff communication 2004/2005 highlights

6. 6 Income Trading fees & trading tariff Stock Exchange listing fees Clearing & settlement fees Depository/custody/nominee fees Income from sale of information Investment income Other income Operating Expenses Staff costs & related expenses IT & computer maintenance expenses Premises expenses Product market & promotion expenses Legal & professional fees Depreciation & amortisation Payment to SFC under dual filing Other operating expenses Operating Profit 4Q04 657 188 107 98 70 77 59 309 157 55 20 3 44 5 31 346 3Q04 570 147 88 72 57 72 90 43 282 129 57 20 2 47 5 20 288 1Q05 574 183 97 92 34 79 43 48 283 141 49 20 2 3 44 5 19 292 3Q05 733 228 108 110 58 82 103 45 282 142 49 20 2 4 40 5 20 450 HK$ mn 2Q05 664 170 99 81 100 83 79 52 288 141 50 20 4 41 5 22 376 Progress so far

7. 7 Solid Foundation Leading to Record Profit Since Merger Note: rounded to the nearest HK$1 million Progress so far 2005 Q320042003200220012000 (HK$ Million) Income 1,9712,3942,020 1,808 1,998 2,312 Operating expenses 8531,1561,224 1,165 1,179 1,331 Operating profit 1,1181,238 796 643 819 981 Share of profits less losses of associates 13 9 5 - - Profit before taxation1,1311,251 805 648 819 981 Taxation (171) (194) (112) (59) (85) (98) Profit attributable to shareholders9601,057693 589 734 883 Cost to income ratio43%48%60%64%59%58% Return on equity*24%26%12%11%14%18% * = based on total shareholders' funds at year-end; if no special dividend was paid for the financial year ended 2003, ROE for 2003 would have been slightly over 18%.

8. 8 Hong Kong must offer attractive products and world-class market and regulatory infrastructures Progress so far Building a quality market H-shares Index futures and options FTSE/Xinhua China 25 Index futures and options New ETFs REITS CBBC (under development) New products Revised connected transactions rules and initial listing criteria Enhanced regulation of sponsors and IFAs Improved Listing enforcement Revised Corporate Governance Best Practices Review of listing decision- making structure Enhanced delisting mechanism Review of GEM Launch of DCASS and PRiME Enhanced IP account services Enhanced nominee services Consolidation of market system networks Reduction in trading spreads (Phase 1) Revamp of HKEx website HKEx disaster recovery website Revamp of Trading Hall Issuer regulationMarket infrastructures 2004/2005 highlights

9. 9 Full Year 2003 27 46 73 1,037 59,011 10.4 21 49 70 1,096 80,533 16.0 184.6 97.2 281.8 54 Number No. of new listings – equity 45 Number Main Board 154.6 59.1 213.8 171.7 HK$bn Fund raised by IPOs * 125.2 HK$bn Fund raised in secondary market 296.9 HK$bn Total fund raised 1,124 Number No. of listed companies – equity Number HK$bn Unit 18.2Average daily turnover 102,789Average daily no. of derivatives contracts 9 GEM Full Year 2004 YTD 30 Nov 2005 Equity and derivatives markets continue to grow Progress so far * Include fund raised by The Link REIT

10. 10 Mainland China offers historic opportunity to the securities market in Hong Kong. Progress so far We now serve Mainland issuers. In longer term, we hope to extend our services to Mainland investors. Becoming a Mainland Partner

11. 11 Progress so far Mainland China enterprises contribute significantly to Hong Kong market

12. 12 (2004/2005)4 th Net incomeHKEx (9/2005)22 th TurnoverDerivatives market (9/2005) (10/2005) 9 th 4 th 16 th 1 st Market capitalisation Funds raised Equity turnover Derivative warrant turnover Securities Market World ranking Hong Kong’s relative performance Hong Kong’s securities market outperformance reflects the success of its Mainland China dimension

13. 13 HKEx ranks 9 th among global exchanges by market capitalisation US$ 982 bn as of 30 Sept 2005 US$ 1,030 bn (HK$ 8 tr) as of 30 Nov 2005 US$ 982 bn as of 30 Sept 2005 US$ 1,030 bn (HK$ 8 tr) as of 30 Nov 2005 Source: World Federation of Exchanges US$bn Hong Kong’s relative performance

14. 14 HKEx ranks 16 th among global exchanges by equity turnover US$ 351 bn as of YTM Sept 2005 US$ 427 bn (HK$ 3.3 tr) as of YTM Nov 2005 US$ 351 bn as of YTM Sept 2005 US$ 427 bn (HK$ 3.3 tr) as of YTM Nov 2005 Source: World Federation of Exchanges US$bn Hong Kong’s relative performance

15. 15 HKEx ranks 4 th among global exchanges by equity fund raised US$ 24.0 bn as of YTM Sept 2005 US$ 35.6 bn (HK$ 277 bn) as of YTM Nov 2005 US$ 24.0 bn as of YTM Sept 2005 US$ 35.6 bn (HK$ 277 bn) as of YTM Nov 2005 Source: World Federation of Exchanges US$bn Hong Kong’s relative performance

16. 16 HKEx ranks 22 nd among global exchanges by derivatives contracts traded 19.3 million contracts as of YTM Sept 2005 23.3 million contracts as of YTM Nov 2005 19.3 million contracts as of YTM Sept 2005 23.3 million contracts as of YTM Nov 2005 Source: World Federation of Exchanges Mil contracts Hong Kong’s relative performance

17. 17 HKEx ranks 4 th among listed exchanges by net income Hong Kong’s relative performance * Net income for their latest financial year (information gathered in July 2005). Market capitalisation as at 30 June 2005

18. 18 HKEx Plan for 2006 Securities trading New Trading Hall / Exhibition Hall Reduction of trading spreads (Phase 2) Launch of CBBC Review of derivative warrants market Improving market surveillance

19. 19 HKEx Plan for 2006 Derivatives trading Improving position limit regime Review of market maker model Exploring the market needs for tailor-made combo Growing existing products and exploring new products Improving market surveillance

20. 20 HKEx Plan for 2006 Clearing services Enhancing CCASS nominee services (e.g. electronic voting) Implementing CCASS fees review Exploring Third Party Clearing Improving risk management

21. 21 HKEx Plan for 2006 Market infrastructures Consolidation of market system networks (Phase 2: CCASS) Capacity upgrade of AMS/3, HKATS and DCASS Re-development of derivatives risk management systems Improving Issuer information dissemination framework

22. 22 HKEx Plan for 2006 Business Development Continue to attract quality issuers for listing Conducting more road-shows and training in Mainland China Strengthening communication with CSRC, other regulatory bodies, issuers and potential issuers in Mainland China

23. 23 HKEx Plan for 2006 Listing regulation Implementing abolition of paid announcements Revamp of listing decision-making structure Review of GEM Enhancing corporate governance Continue to review IPO vetting process Automation of Listing MIS and internal process

24. 24 HKEx Plan for 2006 Corporate Improving customer services Empowering management by better Management Information Systems Review of remuneration structure and policies Succession planning Corporate citizenship

25. 25 Challenges ahead Balance between investors protection and market development Shareholder empowerment and regulatory enforcement System development vs system stability and availability Business ethnics and integrity Hong Kong’s quality advantage in China dimension Growing competition in issuer listing and new products Increasing participation of hedge funds

26. 26 Thank you www.hkex.com.hk