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2005 Exchange Fund Position

2005 Exchange Fund Position. Press Conference 19 January 2006. Investment Objectives of The Exchange Fund. Investment objectives of the Exchange Fund are: (1) to preserve capital;

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2005 Exchange Fund Position

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  1. 2005 Exchange Fund Position Press Conference 19 January 2006

  2. Investment Objectives ofThe Exchange Fund Investment objectives of the Exchange Fund are: (1) to preserve capital; (2) to ensure that the entire Monetary Base at all times will be fully backed by highly liquid short-term US dollar denominated securities; (3) to ensure sufficient liquidity for the purpose of maintaining monetary and financial stability; and (4) subject to (1) – (3) above, to achieve an investment return that will preserve the long-term purchasing power of the assets.

  3. Markets in 2005 • Exchange rates: • Yen vs USD : -13.2% • Euro vs USD : -13.2% • Equity markets: • US (S&P500) : +3.0% • Europe (MSCI Europe) : +21.6% • Japan (Topix) : +43.5% • Hong Kong (HSI) : +4.5% • Interest rates: • USD (Fed funds target rate) : +2.0% • Euro (ECB repo rate) : +0.25% • Yen (BoJ call rate) : no change

  4. Investment Income * Unaudited figures for 2005 ^ Including dividends

  5. Exchange FundChange in Accumulated Surplus Note (1): The effect of changing from using mid-price to using bid-price for valuing securities held, and using ask-price for valuing securities issued.

  6. Exchange FundHistorical Change in Accumulated Surplus * unaudited figures for 2005

  7. Exchange FundAbridged Balance Sheet Note (1): Before 2005, premises were stated at valuation less depreciation. From 2005, premises are stated at cost less depreciation. The revaluation surplus on premises is therefore reversed.

  8. Exchange Fund Performance Against Investment Benchmark • Investment return from 2000 computed in accordance with CFA Global Investment Performance Standards

  9. Investment Return* of the Exchange Fund # Hong Kong CPI-A at end-November 2005 * Investment return from 2000 computed in accordance with CFA Global Investment Performance Standards

  10. HK$bn Treasury Return Against Estimate

  11. Outlook for 2006

  12. Currencies 102.0 104.2 106.4 108.7 111.1 113.6 116.3 119.0 121.9

  13. Currencies 102.0 104.2 106.4 108.7 111.1 113.6 116.3 119.0 121.9

  14. Bond yields 102.0 104.2 106.4 10-year Bund yield (LHS) 108.7 111.1 113.6 116.3 119.0 121.9

  15. Bond yields 102.0 104.2 106.4 108.7 111.1 113.6 116.3 119.0 2-year JGB yield (RHS) 121.9

  16. Equities

  17. Equities

  18. 2005 Exchange Fund Position Press Conference 19 January 2006

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