1. 1 Exchange Fund 1999 Results

2. 2 Exchange Fund (Group) End-1999End-1998Increase (HK$ bn)(HK$ bn)(%) Assets1,014.4921.410.1 Liabilities723.1679.16.5 Accumulated Surplus291.3242.320.2

3. 3 Exchange Fund (Group) 19991998Increase (HK$ bn)(HK$ bn)(%) Income105.194.511.2 Expenditure56.142.332.6 Surplus49.052.2(6.2) Accumulated surplus242.3190.127.5 brought forward at end of previous year Accumulated surplus291.3242.320.2 carried forward at end of current year

4. 4 Exchange Fund (Group) Accumulated SurplusIncrease (HK$ bn)(%) 1993127.619.6 1994128.60.8 1995160.124.5 1996172.98.0 1997190.110.0 1998242.327.5 1999291.320.2

5. 5 Exchange Fund (Group) Asset Mix End-1999End-1998(HK$ bn) Cash and short-term funds167.1133.3 Fixed deposits77.352.4 Certificates of deposit5.027.8 Investments738.4677.0 Mortgage loans8.711.4 Fixed assets0.30.3 Other assets17.619.2 Total1,014.4921.4

6. 6 End-1999End-1998 Cash11.8%7.1% Bonds60.0%68.6% Equities26.2%22.0% Others2.0%2.3% Total100.0%100.0% HK$1,014.4 bnHK$921.4 bn Exchange Fund (Group) Instrument Mix

7. 7 Exchange Fund (Group) Currency Mix End-1999End-1998 US Dollar59.0%61.8% HK Dollar25.2%23.9% European currencies11.1%11.3% Yen4.3%2.6% Others0.4%0.4% Total100.0%100.0% HK$1,014.4 bnHK$921.4 bn

8. 8 Exchange Fund (Group) Liabilities End-1999End-1998(HK$ bn) Certificates of Indebtedness118.286.5 Coins in circulation5.85.8 Balance of the banking system8.02.5 Exchange Fund Bills and Notes101.898.3 Placements by other government funds392.2424.6 Placements by other institutions29.121.4 Other liabilities 68.040.0 Total723.1679.1

9. 9 31 Dec 199931 Dec 1998(HK$ bn) MONETARY BASE Certificates of Indebtedness118.286.5 Coins in circulation5.85.8 Balance of the banking system8.02.5 Exchange Fund Bills and Notes issued101.898.3 Interest payable on Exchange Fund Notes0.60.6 Total234.4193.7(a) BACKING ASSETS Investment in designated US dollar assets255.7207.4 Interest receivable on investment1.32.3 Total257.0209.7(b) BACKING RATIO [ (b) / (a) ] x 100%109.6%108.2% Exchange Fund Currency Board Account

10. 10 Hong Kong Equities Portfolio HK$ Total outstanding at 31 Dec 99218.8 bn Long-term Investment Portfolio 50.0 bn Balance in Disposal Program at 31 Dec 99168.8 bn

11. 11 Disposal of Hong Kong Equities HK$ Tracker Fund - IPO 33.3 bn - 4Q 1999 Tap3.3 bn* - 1Q 2000 Tap12.2 bn* - total disposed 48.8 bn Tracker Fund - 2Q 2000 Tap announced12.0 bn * Total proceeds from the TraHK units sold through the Taps.

12. 12 Exchange Fund 2000 Investment Outlook: Very Difficult US equities: unprecedented highs US interest rates: poised to go higher Currencies: volatile Market liquidity: reduced from 1999 (particularly in bonds and currencies)