March 2006

1
Hong Kong Baptist University1998 Superannuation
Fund
Investment review
HSBC Investments (Hong Kong) Limited Level 22,
HSBC Main Building, 1 Queens Road Central, Hong
Kong Telephone [phone] Facsimile
852 2845 0226 Web site www.hsbcinvestments.com.
hk
March 2006
2
Agenda

• Market performance
• Investment choice
• Fund performance
• Peers review
• Asset allocation
• Investment strategy
• Factors for consideration before switching

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Market performance
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Market statistics 3 months to December 2005 (in
HKD terms)
Bonds Citigroup World Government Bond
Indices, HSBC HKD Bond Index (Overall) Equities
USA (SP 500), UK (FTSE-100), Germany (DAX),
Japan (Nikkei 225), Hong Kong (HSI), Australia
(All Ordinaries), Taiwan (WPI), Korea
(KOSPI) Source Thomson Financial Datastream,
Bloomberg
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Market statistics 1 year to December 2005 (in
HKD terms)
Bonds Citigroup World Government Bond
Indices, HSBC HKD Bond Index (Overall) Equities
USA (SP 500), UK (FTSE-100), Germany (DAX),
Japan (Nikkei 225), Hong Kong (HSI), Australia
(All Ordinaries), Taiwan (WPI), Korea
(KOSPI) Source Thomson Financial Datastream,
Bloomberg
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Market statistics 3 months to January 2006 (in
HKD terms)
Bonds Citigroup World Government Bond
Indices, HSBC HKD Bond Index (Overall) Equities
USA (SP 500), UK (FTSE-100), Germany (DAX),
Japan (Nikkei 225), Hong Kong (HSI), Australia
(All Ordinaries), Taiwan (WPI), Korea
(KOSPI) Source Thomson Financial Datastream,
Bloomberg
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Market statistics 1 year to January 2006 (in HKD
terms)
Bonds Citigroup World Government Bond
Indices, HSBC HKD Bond Index (Overall) Equities
USA (SP 500), UK (FTSE-100), Germany (DAX),
Japan (Nikkei 225), Hong Kong (HSI), Australia
(All Ordinaries), Taiwan (WPI), Korea
(KOSPI) Source Thomson Financial Datastream,
Bloomberg
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Investment choice
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Risk profile of various investment options
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Fund performance
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Investment performance HKBU 1998 High Growth
FundCumulative return to 31 Jan 2006
Source HSBC Investments Performance is net of
fees return in HKD. Past performance is not
necessarily a guide to future performance
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Investment performance HKBU 1998 Growth
FundCumulative return to 31 Jan 2006
Source HSBC Investments Performance is net of
fees return in HKD. Past performance is not
necessarily a guide to future performance
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Investment performance HKBU 1998 Balanced
FundCumulative return to 31 Jan 2006
Source HSBC Investments Performance is net of
fees return in HKD. Past performance is not
necessarily a guide to future performance
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Investment performance HKBU 1998 Stable
FundCumulative return to 31 Jan 2006
Source HSBC Investments Performance is net of
fees return in HKD. Past performance is not
necessarily a guide to future performance
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Investment performance HKBU 1998 Money Market
FundCumulative return to 31 Jan 2006
Source HSBC Investments Performance is net of
fees return in HKD. Past performance is not
necessarily a guide to future performance
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Investment performance HKBU 1998 USD Money
Market FundCumulative return to 31 Jan 2006
Source HSBC Investments Performance is net of
fees return in HKD. Past performance is not
necessarily a guide to future performance
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Peers review
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Investment performance Year 2005
Source HSBC Investments, Watson Wyatt Managed
Fund Report, December 2005. Portfolio net of fees
performance in HKD term. Past performance is not
necessarily a guide to future performance
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Asset allocation
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Asset allocation as at 31 January 2006

• Hong Kong Baptist University 1998 Superannuation
  Fund

High Growth Growth Balanced Stable Ben
chmark Fund Benchmark Fund Benchmark Fund Bench
mark Fund
Equities Hong Kong 30.0 27.9 24.0 22.6 17.0 15.9
10.0 10.2 Japan 12.0 13.9 9.0 12.7 6.5 9.6 4.0
6.5 Other Asia Pacific 12.0 16.7 9.0 12.4 6.5 12
.1 4.0 6.3 N. America 18.0 16.8 14.0 13.7 10.0
7.7 6.0 5.4 Europe inc. UK 18.0 18.9 14.0 14.8 1
0.0 10.3 6.0 6.3 Others 0.0 2.0 0.0 0.3 0.0 0.0 0
.0 0.0 Sub-total 90.0 96.2 70.0 76.5 50.0 55.6 3
0.0 34.7 Bonds US 0.5 4.4 8.7 10.7 Non-USD
3.1 16.4 30.4 39.7 Sub-total
7.0 3.6 25.0 20.8 45.0 39.4 60.0 50.4 Cash
3.0 0.2 5.0 2.7 5.0 5.0 10.0 14.9
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Investment strategy
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Equity market outlook

• Low returns during Fed tightening cycle
• Strong returns expected if economy soft lands
• Equity market valuation remains attractive
  against other asset classes
• Favour Asia Emerging markets on growth
  valuation basis

Monetary pause favours equities
US Equity Market Return During FED Tightening
Cycle First half 3 Second Half -1 12
Months After FED Stops Tightening Soft Landing
15 Hard Landing -14
Emerging markets remain cheap
Europe
Hong Kong
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Bond and currency outlook
Record US deficit fully financed by portfolio
flows
Bonds are becoming less expensive
Dollar supported by higher rates
()
()
()
Source Thomson Financial Datastream
Source Thomson Financial Datastream
Source Morgan Stanley Research. Trailing
four- quarter average as of 2Q05

• Bond market
• Valuations improved but real yields still low
• Bonds offer cash-like returns
• Range trading expected

• Currency market
• US dollar rally in 2005 driven by higher US rates
• Interest rates differential narrowing coupled
  with record twin deficits, US dollar expected to
  resume longer term weakening

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Summary

• Global growth to moderate with gradual increase
  in inflation in 2006. US Fed to raise rates 50
  basis points in 1Q and pause thereafter. China
  remains the key driver.
• Equity markets remain favourable as profit growth
  is sound, valuations supportive and rate cycle
  likely to pause.
• Asian and emerging market equities remain
  attractively priced and domestic fundamentals in
  Asia strong.
• Bond yields are expected to range trade.
• US dollar expected to weaken in 2006.

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Asset Class Outlook

• Equities Fundamental conditions are positive for
  financial markets, particularly equities
• Cash We moderately underweight cash
• Bonds Bond returns to be around cash levels
• Asia Expect domestic consumption and asset
  reflation as prominent themes
• Japan Positive earnings revision compensate for
  market appreciation
• Eurozone Low macro risk with low inflation and
  modest increases in short term interest rates
• UK Mining sector strength and takeover activity
  continue to drive market performance
• Hong Kong Could be due for short-term
  consolidation
• US Investor sentiment is becoming stretched,
  consolidation could happen in the near term

Regional Outlook
Overweight
Underweight
Neutral
Data as of February 2006
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Factors for consideration before switching
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Dangers of market timing

• Average annualized return (1980 - 2005)

HSI full period return
HSI full period less 10 best performing days
HSI full period less 20 best performing days
HSI full period less 30 best performing days
Data as at 31 December 2005 SourceThomson
Financial Datastream Investment involves risk.
Investment value can rise as well as fall. For
internal use only? The opinions expressed herein
should not be considered to be a recommendation
to any reader of this material to buy or sell
securities, commodities, currencies or other
investments referred to herein.
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Reference table for suggested investment choices
Investment horizon (e.g. years to
retirement) Fund type 30 gt20-30 gt10-20 5-10
Very short years years years years (lt 5
years)
HKBU - High Growth Fund üüü üü ü û û HKBU -
Growth Fund üü üüü üü û û HKBU - Balanced Fund
ü üü üüü üü ü HKBU - Stable Fund
ü ü üü üüü üü HKBU - Money Market Funds û û
ü üü üüü


üüü Most appropriate üü Appropriate ü
Acceptable û Not appropriate
Note Please note that the above table is
designed for an average member. The final choice
for any member may be based on a variety of
factors.
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Contact details
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How to contact us ?
Members Choice Investment Hotline [phone]
Investment Service e-mail mbrs_choice_at_hsbc.com.h
k Web site http//www.hsbcinvestments.com.hk
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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
  Investments (Hong Kong) Limited to any reader of
  this material to buy or sell securities,
  commodities, currencies or other investments
  referred to herein. HSBC Investments (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 Investments (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 Investments
  (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.

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HSBC Investments (Hong Kong) Limited